CAIIB 2020 Bank Financial Management Mock Tests Set 7

An L/C which can be amended or canceled by the Issuing Bank at any time prior to its expiry without notice to the Beneficiary is called a / an


Options are :

  • Confirmed L/C
  • Irrevocable L/C
  • Revolving L/C
  • Revocable L/C

Answer :Revocable L/C

________ is issued by ECGC in the nature of a counter guarantee to the bank against possible losses that they may suffer on account of the guarantees issued by them on behalf of its exporter clients.


Options are :

  • Export finance guarantee
  • Post shipment export Credit insurance
  • Export production finance guarantee
  • Export performance indemnity

Answer :Export performance indemnity

CAIIB 2020 Bank Financial Management Mock Tests Set 8

Discrepant documents under a LC are received by the nominated bank. The nominated bank requests the issuing bank for authority to pay. Which of the following is the BEST course of action for the issuing bank?


Options are :

  • If the discrepancies are acceptable to the issuing bank, the issuing bank need not refer the discrepancies to the applicant
  • The issuing bank should refer the discrepancies to the applicant for their approval
  • The issuing bank must reply to the nominated bank within 5 banking days following the date of receipt of such request
  • An issuing bank need not check documents for compliance if it authorizes the nominated bank to pay

Answer :The issuing bank should refer the discrepancies to the applicant for their approval

The value of the currency is decided supply and demand factors for a particular currency under......


Options are :

  • Direct exchange rate
  • Indirect exchange rate
  • Fixed exchange rate
  • Floating exchange rate

Answer :Floating exchange rate

When the Advising Bank, at the request of the Issuing Bank, adds its confirmation which would constitute a definite undertaking by the former the L/C is known as a / an


Options are :

  • Irrevocable L/C
  • Transferable L/C
  • Confirmed L/C
  • Revolving L/C

Answer :Confirmed L/C

CAIIB 2020 Bank Financial Management Mock Tests Set 1

Who among the following is treated as a person of Indian origin but not NRI


Options are :

  • Spouse of an Indian citizen who is a foreign citizen
  • Indian Ambassador to the USA
  • Students going abroad for higher studies
  • Spouse of an Indian citizen who is employed overseas and residing with him/her

Answer :Spouse of an Indian citizen who is a foreign citizen

A foreign tourist had upon arrival in India opened an NRO account with US$ 10 million After 3 months when he leaves the country he requests for remittance of the balance held in his account As a branch manager what will you do?


Options are :

  • You will permit the remittance as requested
  • You will permit remittance up to an amount equivalent to one million US$
  • You will approach Reserve Bank of India for necessary permission
  • You will not allow the remittance

Answer :You will permit the remittance as requested

An FCNR(B) account is being operated on the basis of power of attorney granted by the account holder. Which of the following operations can't be carried out by the holder of the power of attorney?


Options are :

  • investment in shares/security
  • Repayment of housing loan raised by the account holder
  • Payment of electricity bill of the account holder
  • All of the above

Answer :All of the above

CAIIB 2020 Bank Financial Management Mock Tests Set 10

Retirement of import bill for GBP 100,000.00 by TT Margin 0.20%, ignore cash discount/premium, GBP/USD 1.3965/75, USD/INR 55.16/18. Compute Rate for Customer. (Please note- Rates used are for example purposes only and should not be compared with current prevailing rates)


Options are :

  • 76.548
  • 76.6985
  • 77.114
  • 77.2682

Answer :77.2682

An LC which authorises the Advising Bank, to transfer, at the request of the Beneficiary ( First Beneficiary) the credit available in whole or in part to one or more other beneficiaries ( Second Beneficiaries) is known as


Options are :

  • Anticipatory LC
  • Revolving LC
  • Transferable LC
  • Back to back credit

Answer :Transferable LC

A market rate of discount for a single payment to be made in the future is a:


Options are :

  • spot rate.
  • simple yield.
  • forward rate.

Answer :spot rate.

CAIIB 2020 Bank Financial Management Mock Tests Set 11

An ancillary LC which arises when the seller(beneficiary) uses the LC opened in his favor to support another LC opened by the Sellerís Bank, favoring his supplier is called


Options are :

  • Transferable LC
  • Back to Back LC
  • Revolving LC
  • none of these

Answer :Back to Back LC

What triggers settlement under a documentary credit?


Options are :

  • evidence of shipment of the goods;
  • letter of introduction;
  • handing over of the documents to an applicant;
  • presentation of complying documents by the beneficiary.

Answer :presentation of complying documents by the beneficiary.

Who is it that undertakes to make payment under a documentary credit?


Options are :

  • The applicant.
  • The advising bank.
  • The issuing bank.
  • The nominated bank.

Answer :The issuing bank.

CAIIB 2020 Bank Financial Management Mock Tests Set 12

The face value of an Import License should take care of:


Options are :

  • Cost of goods only
  • Cost, Insurance and Freight (i.e) CIF
  • CIF plus interest
  • CIF, Interest and Agency Commission, if any.

Answer :CIF, Interest and Agency Commission, if any.

Which one of the following is not a party to a documentary credit?


Options are :

  • The confirming bank.
  • The beneficiary.
  • The applicant.
  • The issuing bank.

Answer :The applicant.

XYZ Bankís foreign correspondent maintaining a Nostro Rupee account with XYZ bank, wants to fund his account by purchase of ? 10.00 million, against US dollars. Assuming that the USD/INR interbank market is at 56.2380/2420, what rate would be quoted to the correspondent, ignoring exchange margin?


Options are :

  • 56.238
  • 56.24
  • 56.242
  • 56.2425

Answer :56.238

CAIIB 2020 Bank Financial Management Mock Tests Set 13

Name the main purpose of a documentary credit.


Options are :

  • To undertake payment to a beneficiary.
  • To give shipping instructions to a beneficiary.
  • To eliminate risk in performance under the purchase or sale contract.
  • To ensure the applicant receives transport documents

Answer :To undertake payment to a beneficiary.

SBI account with Citi bank in New Jersey in US $, is used by BOB. For BOB this account is called as ...... account.


Options are :

  • NOSTRO
  • VOSTRO
  • LORO
  • Mirror

Answer :LORO

XYZ Bankís foreign correspondent maintaining a Nostro Rupee account with XYZ bank, wants to fund his account by purchase of ? 10.00 million, against US dollars. Assuming that the USD/INR interbank market is at 56.2380/2420, what rate would be quoted to the correspondent, ignoring exchange margin? Calculate amount of USD XYZ Bank would receive in its USD Nostro account, if the deal is struck.


Options are :

  • 175438.6
  • 177803.07
  • 177815.71
  • 178571.43

Answer :177815.71

CAIIB 2020 Bank Financial Management Mock Tests Set 14

Management of risks begins with their ________ and __________.


Options are :

  • identification , quantification
  • acceptance, identification
  • acceptance, quantification
  • acceptance, mitigation

Answer :identification , quantification

CAIIB 2020 Bank Financial Management Mock Tests Set 2

The total regulatory capital as per Basel 3 consists of Tier I and Tier II capital. These two are also known as -


Options are :

  • going-concern capital, gone-concern capital
  • gone-concern capital, going-concern capital
  • Primary capital, Secondary Capital
  • Secondary Capital, Primary Capital

Answer :going-concern capital, gone-concern capital

Which of the following is least likely to be used for the calculation of effective duration?


Options are :

  • Change in bondís yield to maturity.
  • Change in benchmark yield curve.
  • Original price of the bond.

Answer :Change in bondís yield to maturity.

Which of the following are main approaches to calculating value-at-risk- I)The correlation method, also known as the variance/covariance matrix method II) Historical simulation III) Monte Cristo simulation IV) Kotler simulation


Options are :

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

Answer :Only I,II,III

CAIIB 2020 Bank Financial Management Mock Tests Set 3

A firm has determined that the value at risk (VaR) of its investment portfolio is $18 million for one day at a 95% confidence level. Which of the following statements regarding this VaR measure is correct?


Options are :

  • There is a 95% probability that the portfolio will lose $18 million on a given day.
  • There is a 95% probability that the portfolio will lose no more than $18 million on a given day.
  • There is a 5% probability that the portfolio will lose $18 million on a given day.
  • There is a 5% probability that the portfolio will lose no more than $18 million on a given day.

Answer :There is a 95% probability that the portfolio will lose no more than $18 million on a given day.

Which of the following hedged positions would be subject to basis risk? I. A jet fuel wholesaler expects the price of jet fuel to fall in one year. The wholesaler, therefore, establishes a short position in a 1-year crude oil contract to offset price declines. II. A drilling company will have one million barrels of crude oil available for sale in August on the east coast. It is currently February, so the company has taken a short 6-month crude oil future position on one million barrels for east coast delivery.


Options are :

  • I only
  • II only
  • Both I and II.
  • Neither I nor II

Answer :I only

The Basel Committee on Banking Supervision has written stress testing principles for banks related to supervisions. How many of the following statements are most likely correct regarding recommendations to supervisors?  I. Supervisors should make annual comprehensive assessments of a bankís stress testing procedures. II. It is necessary for supervisors to question the use of stress tests that produce unrealistic results or are inconsistent with a bankís risk appetite. III. It is prudent for supervisors to conduct additional stress tests using common scenarios within a bankís jurisdiction. IV. For a robust analysis, supervisors should utilize capital ratios in their assessment of capital adequacy and determine the mobility of capital across business lines.


Options are :

  • 1
  • 2
  • 3
  • 4

Answer :3

CAIIB 2020 Bank Financial Management Mock Tests Set 4

Which of the following is most accurate regarding the credit risk of a currency swap? As the value of the: I. domestic currency leg increases, so does the credit risk of the domestic currency payer. II. foreign currency leg increases, so does the credit risk of the foreign currency payer.


Options are :

  • I only.
  • II only.
  • Both I and II.
  • Neither I nor II.

Answer :Neither I nor II.

Risk Management Organization consists of:


Options are :

  • The Board of Directors
  • The Risk Management Committee of the Board
  • The Committee of senior-level executives
  • All of the above

Answer :All of the above

EACH of the following is a source of basis risk EXCEPT:


Options are :

  • The asset whose price is to be hedged may not be exactly the same as the asset underlying the futures contract.
  • The hedger cannot be 100% certain that the counterparty in the forward contract will meet their obligation (even the exchange-traded futures contract has a similar but smaller risk)
  • The hedger may be uncertain as to the exact date when the asset will be bought or sold.
  • The hedge may require the futures contract to be closed out before its delivery month.

Answer :The hedger cannot be 100% certain that the counterparty in the forward contract will meet their obligation (even the exchange-traded futures contract has a similar but smaller risk)

CAIIB 2020 Bank Financial Management Mock Tests Set 5

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