CAIIB 2020 Bank Financial Management Mock Tests Set 5

If the central bank of a country raises interest rates sharply, the country’s currency will most likely


Options are :

  • Increase in relative value.
  • Remain unchanged in value.
  • Decrease in relative value.
  • Decrease sharply in value at first and then return to its initial value

Answer :Increase in relative value.

Which of the following factors is least likely to affect a country’s currency foreign exchange rates?


Options are :

  • Interest rates in the country.
  • Political stability in the country.
  • Inflation in the country.
  • The tax rate in the country

Answer :Inflation in the country.

CAIIB 2020 Bank Financial Management Mock Tests Set 6

With respect to letter of credit, which of the following changes have been made as per UCPDC 600? I)“Proxies” can now sign on behalf of the insurance company or underwriter. II) Percentage to be covered will be understood as a “minimum” coverage required. III) The document may contain reference to any “exclusion clause”. IV) The risks must be covered at least between the shipment points stipulated in the credit.


Options are :

  • Only I,II
  • Only I,II,III
  • Only IV
  • All of the above viz. I,II,III,IV

Answer :All of the above viz. I,II,III,IV

Which of the following is NOT a liability or responsibility of the applicant of Letter of credit? I) The applicant of the LC must give complete and precise instructions for issuance of letter of credit and any amendment thereof. II) The applicant must apply for the issuance of LC via bank’s online web portal. III)The LC most not include excessive details or give any reference of credit previously issued, to avoid any confusion or misunderstanding. IV) the applicant should indemnify banks against any obligation imposed by foreign laws.


Options are :

  • Only I
  • Only II
  • Only III
  • All of the above viz. I,II,III,IV

Answer :Only II

Which of the following is  NOT a liability or responsibility of the Issuing bank with respect to letter of Credit? I)The issuing bank gives a definite undertaking to make payment in case of sight and accept and pay on maturity in case of acceptance or deferred payment, to authorize bank to negotiate and to reimburse the negotiating bank, provided that the stipulated documents are presented under the Letter of Credit II) The LC or amendment issued must be precise and there should be no ambiguity in the instructions and details mentioned in the LC III) It is the responsibility of the issuing bank to examine the documents with reasonable care and determine by international standards whether the documents appear on face, to be complying the term of the credit. IV) If issuing bank wishes to refuse the documents, it should do so in a reasonable time, i.e. within 14 banking days following the date of receipt of documents.


Options are :

  • Only II
  • Only III
  • Only IV
  • All of the above viz. I,II,III,IV

Answer :Only IV

CAIIB 2020 Bank Financial Management Mock Tests Set 7

Which of the following are protections given to banks under UCPDC 600? I)Banks do not assume any responsibility for genuineness of the documents submitted or any discrimination in the contents mentioned in the documents II)Banks are not responsible for any loss arising due to delay in transmission or loss of messages, documents, or telecommunication. No responsibility is taken by the banks for errors in translation/interpretation of technical terms III) Banks also do not take responsibility for any loss arising due to close of their business by the acts of god, commotions, civil riots, floods or any other causes beyond their control IV)Banks do not take any responsibility for the acts of the correspondent banks, whether the bank was chosen by the applicant or by itself. The applicant is liable to pay the charges, if the charges were on account of the third party and could not be collected


Options are :

  • Only II
  • Only III
  • Only IV
  • All of the above viz. I,II,III,IV

Answer :All of the above viz. I,II,III,IV

ICC published a set of international rules for the interpretation of trade terms known as


Options are :

  • Incoterms
  • LC Parameters
  • Codex
  • LC terms

Answer :Incoterms

The LC issuing bank on receipt of documents on 15.9.2019 (Tuesday) took two days to examine the same and referred the documents to the applicants for their acceptance on 17.9.2018 (Thursday). The applicants came up with a discrepancy in documents, on 22.9.2018 (Tuesday) evening, stating that the documents need to be rejected as the Bill of Lading was not stamped with “On board” stamp and initialed by the shipping company. With 21.09.2018 holiday on account of Dussehra.  The issuing bank sent a swift message of rejection to the negotiating bank on 23.9.2018. On receipt of Swift message from the issuing bank, informing rejection of documents and discrepancy, as informed by the applicant, the negotiating bank referred the matter back to the opening bank stating that the message of refusal and notification of discrepancy was not received within the time period of 5 working days, and as such claimed to be reimbursed as per LC terms.


Options are :

  • The negotiating bank is correct, and issuing bank should reimburse the claims as per LC terms.
  • The issuing bank has notified the discrepancy well within stipulated 5working days. 19th and 20th being Saturday and Sunday and 21st being holiday on account of dusshera.
  • The negotiating bank will accept the rejected documents but with a penalty on issuing bank for the delay, Since 21st was not a holiday in negotiating banks country.
  • The issuing bank will impose a penalty on the applicant for not informing it well on time.

Answer :The issuing bank has notified the discrepancy well within stipulated 5working days. 19th and 20th being Saturday and Sunday and 21st being holiday on account of dusshera.

CAIIB 2020 Bank Financial Management Mock Tests Set 1

An LC calls for insurance from warehouse to warehouse, and insurance to cover 110% of the invoice value.Bank A negotiates and forwards documents, covering invoice for USD 17,920.00 under a Multi model transport document (that is Combined Bill of Lading) dated 15.9.2018, to the opening bank, under said LC. The insurance enclosed to the documents is for USD 20,000.00 and is dated 17.9.2018. Should the bank accept the insurance policy?


Options are :

  • Yes.
  • No, insurance cover is not appropriate
  • No, insurance is post dated
  • No, Combined bill of lading is not allowed.

Answer :No, insurance is post dated

Every person/firm or company must have _______code, issued by DGFT, to engage in export-import trade.


Options are :

  • IEC
  • ACU
  • NBC
  • IPC

Answer :IEC

The exporter is required to submit the export documents, along with the copy of EDF/SOFTEX form within _______days from the date of shipment to an authorized dealer.


Options are :

  • 7
  • 14
  • 21
  • 28

Answer :21

CAIIB 2020 Bank Financial Management Mock Tests Set 10

Export proceeds from any of the ACU countries should be settled in US dollar terms through a separate _______ account maintained by the AD for this purpose.


Options are :

  • USD
  • Euro
  • ACU
  • EDF

Answer :ACU

An LC is going to expire on 11.05.2019 (Saturday). The issuing bank receives the documents for compliance on 11.05.2019 (Saturday) but due annual general elections the bank was closed. The course of action on behalf of issuing bank is-


Options are :

  • Extend the date of presentation to next working day i.e. 13.05.201 (Monday)
  • Return the documents to the negotiating bank, with the covering – “Documents received beyond schedule”
  • Issuing bank will have to honour the documents on same day i.e. 11.05.2019
  • Honour the documents on 12.02.2019 i.e. Sunday

Answer :Extend the date of presentation to next working day i.e. 13.05.201 (Monday)

An import bill not retired by the importer should be crystallized by the bank on what day?


Options are :

  • On 21st day from the date of Bill of Lading
  • On the 10th day from the receipt of documents at the counters of the bank
  • On the expiry of five banking days
  • On the day of receipt of the Bill

Answer :On the 10th day from the receipt of documents at the counters of the bank

CAIIB 2020 Bank Financial Management Mock Tests Set 11

In valuing interest rate swaps, the zero-coupon method uses all of the following variables except


Options are :

  • Discount rate.
  • The timing of cash flows as specified by the contract.
  • Estimated net settlement cash flows.
  • Underlying assets.

Answer :Underlying assets.

The exporter is required to apply in form ______ for permission for extension of time limit for realization of export proceeds.


Options are :

  • ETX
  • ADX
  • ADU
  • ACU

Answer :ETX

An American importer of English clothing has contracted to pay an amount fixed in British pounds three months from now. If the importer worries that the US dollar may depreciate sharply against the British pound in the interim, it would be well advised to


Options are :

  • Buy pounds in the forward exchange market.
  • Sell pounds in the forward exchange market.
  • Buy dollars in the futures market.
  • Sell dollars in the futures market.

Answer :Buy pounds in the forward exchange market.

CAIIB 2020 Bank Financial Management Mock Tests Set 12

A Bank received an LC for USD 2 Million issued by MT 700 and opened on Jan 25, 2011. The credit calls for shipment of 200 tonnes of good quality wheat cultivated in Punjab. What is the time available for issuing bank for examination of documents under UCP600?


Options are :

  • 21 days
  • Reasonable time not exceeding 7 days
  • Reasonable time not exceeding 7 banking days
  • Five banking days

Answer :Five banking days

A swap transaction involves ____


Options are :

  • purchase of currency
  • sale of currency
  • purchase of currency against sale or forward sale of the currency.
  • simultaneous purchase and sale of one currency against another for different settlement dates.

Answer :simultaneous purchase and sale of one currency against another for different settlement dates.

An export unit in SEPZ, can retain _____ per cent of the export proceeds in his   EEFC    account with the AD.


Options are :

  • 50
  • 75
  • 80
  • 100

Answer :100

CAIIB 2020 Bank Financial Management Mock Tests Set 13

Mirror account is the shadow account of _______account.


Options are :

  • Vostro
  • Loro
  • Nostro
  • All the above

Answer :Nostro

If a $1,000 bond sells for $1,125, which of the following statements are correct? I. The market rate of interest is greater than the coupon rate on the bond. II. The coupon rate on the bond is greater than the market rate of interest. III. The coupon rate and the market rate are equal. IV. The bond sells at a premium. V. The bond sells at a discount.


Options are :

  • I and IV.
  • I and V.
  • II and IV.
  • II and V.

Answer :II and IV.

The transactions of the Bank undertaken to sell the surplus and buy the required foreign currencies in order to keep its position ‘square’ are known as ___.


Options are :

  • Cover operations
  • Merchant transactions
  • Exchange transactions
  • forward transactions

Answer :Cover operations

CAIIB 2020 Bank Financial Management Mock Tests Set 14

_______term refers an account that cannot be converted and repatriated into foreign currency.


Options are :

  • Non- Resident Ordinary Rupee or NRO Account
  • Non- Resident Rupee or NRE Account
  • FCNR Account
  • Retail Account

Answer :Non- Resident Ordinary Rupee or NRO Account

In Exchange Rate Mechanism Spot Rate means settlement & delivery taken place on ...... day


Options are :

  • Equals to TOM (tomorrow) rate
  • T+1
  • T+2
  • T+3

Answer :T+2

[Case Study] Mr. Banerjee of Kolkata, issued a LC favouring an exporter based in Kenya. The exporter also dispatched the consignment well on time and handled over the documents to his negotiating bank. Negotiating bank also sent all the documents well on time to the applicants bank. Applicant bank on monitoring the documents notices that the insurance policy in the documents have been issued more than once in original. What should be course of action of Applicant’s bank?


Options are :

  • Applicants bank should not honour the documents since insurance policy is issued in original more than once.
  • Applicant’s bank should raise this objection to the negotiating bank and must ask for all the original insurance policies. And should only honour the documents on receiving all the insurance policies in original.
  • The applicant bank is wrong, and it must honour the documents since single insurance policy is more than enough.
  • The applicant bank is wrong as there is no need of insurance to honour the documents and issue the credit to the exporter.

Answer :Applicant’s bank should raise this objection to the negotiating bank and must ask for all the original insurance policies. And should only honour the documents on receiving all the insurance policies in original.

CAIIB 2020 Bank Financial Management Mock Tests Set 2

The effective date of realization of a foreign currency bill is the _____ date of credit to the ________ account.


Options are :

  • maturity, Vostro
  • value, Nostro
  • maturity, Nostro
  • maturity,Loro

Answer :value, Nostro

One of the essential differences between an OTC and an Exchange-traded derivative is


Options are :

  • OTC derivatives are cheaper while Exchange-traded derivatives are costly
  • OTC derivatives are for customers while Exchange-traded derivatives are for banks
  • In OTC derivatives, counterparty risk is prominent, whereas in exchange-traded derivatives, counterparty risk is totally absent
  • OTC derivatives are for hedging risks whereas Exchange-traded derivatives are used for speculation

Answer :In OTC derivatives, counterparty risk is prominent, whereas in exchange-traded derivatives, counterparty risk is totally absent

Factoring is defined as:


Options are :

  • Agreement between the exporter and importer to factor the price of shipping goods into the export invoice.
  • Agreement between the financial institution and the importer to manage the Credit portfolio of the exporter.
  • Agreement between the financial institution and the exporter for purchase of the latter’s book debts and control the credit extended to the importers.
  • Agreement between the exporter’s Bank and the importer’s bank discounting of export receivables without recourse.

Answer :Agreement between the financial institution and the exporter for purchase of the latter’s book debts and control the credit extended to the importers.

CAIIB 2020 Bank Financial Management Mock Tests Set 3

ECGC adopts a _____  fold classification for country risk.


Options are :

  • 5
  • 6
  • 7
  • 8

Answer :7

Comment / Suggestion Section
Point our Mistakes and Post Your Suggestions