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Question 1 of 5
1. Question
2 points1. With reference to Exchange Traded Fund(ETF), consider the following statements:
1. An ETF is a marketable security that can be traded like common stocks on the stock exchange.
2. It can be bought and sold at current market prices only at the end of trading day.
3. It is not good for investment purposes because of their high cost and not being tax efficient.
Which of the statements given above is/are correct?Correct
Answer: A
Explanation:
● Statement 1 is correct: An ETF is a marketable security that tracks an index, a commodity, bonds or basket of assets like an index fund and that can be traded like common stocks on the stock exchange.
● Statement 2 is incorrect: ETFs can be bought and sold at current market prices at any time during the trading day, unlike mutual funds and unit investment trusts, which can only be traded at the end of the trading day.
● Statement 3 is incorrect: ETFs is attractive for investments because of their low costs, tax efficiency, and tradability.
Additional information: Exchange-traded fund (ETF) is a basket of securities that trades on an exchange just like a stock does. An ETF is a marketable security that tracks an index, a commodity, bonds or basket of assets like an index fund. ETFs can be bought and sold at current market prices at any time during the trading day, unlike mutual funds and unit investment trusts, which can only be traded at the end of the trading day. ETFs can contain all types of investments, including stocks, commodities, or bonds; some offer U.S.-only holdings, while others are international. ETFs offer low expense ratios and fewer broker commissions than buying the stocks individually. ETF share prices fluctuate all day as the ETF is bought and sold. An ETF can be structured to track anything from the price of an individual commodity to a large and diverse collection of securities. ETFs can even be structured to track specific investment strategies.Incorrect
Answer: A
Explanation:
● Statement 1 is correct: An ETF is a marketable security that tracks an index, a commodity, bonds or basket of assets like an index fund and that can be traded like common stocks on the stock exchange.
● Statement 2 is incorrect: ETFs can be bought and sold at current market prices at any time during the trading day, unlike mutual funds and unit investment trusts, which can only be traded at the end of the trading day.
● Statement 3 is incorrect: ETFs is attractive for investments because of their low costs, tax efficiency, and tradability.
Additional information: Exchange-traded fund (ETF) is a basket of securities that trades on an exchange just like a stock does. An ETF is a marketable security that tracks an index, a commodity, bonds or basket of assets like an index fund. ETFs can be bought and sold at current market prices at any time during the trading day, unlike mutual funds and unit investment trusts, which can only be traded at the end of the trading day. ETFs can contain all types of investments, including stocks, commodities, or bonds; some offer U.S.-only holdings, while others are international. ETFs offer low expense ratios and fewer broker commissions than buying the stocks individually. ETF share prices fluctuate all day as the ETF is bought and sold. An ETF can be structured to track anything from the price of an individual commodity to a large and diverse collection of securities. ETFs can even be structured to track specific investment strategies. -
Question 2 of 5
2. Question
2 points2. In the context of Treasury Bills, consider the following statements:
1. It is a long-term debt obligation with a maturity period of more than one year.
2. It is issued only by the central government, not by the state government.
3. It can act as short-term investment avenues for the banks and financial institutions.
Which of the statements given above is/are correct?Correct
Answer: D
Explanation:
● Statement 1 is incorrect: It is a short-term debt obligation with a maturity period of less than one year.
● Statement 2 is correct: It is issued only by central government not by state government.
● Statement 3 is correct: It can act as short-term investment avenues for the banks and financial institutions.
Additional information: Treasury Bills, other than providing short-term cushion against the government also function as short-term investment avenues for the banks and financial institutions, besides functioning as requirements of the CRR and SLR of the banking institutions. RBI is Banker / Debt manager for both State and Union Government. However, presently t-bills are issued only by central government and not state governments. Tbills are sold at discount and re-purchased at par value (face value).Incorrect
Answer: D
Explanation:
● Statement 1 is incorrect: It is a short-term debt obligation with a maturity period of less than one year.
● Statement 2 is correct: It is issued only by central government not by state government.
● Statement 3 is correct: It can act as short-term investment avenues for the banks and financial institutions.
Additional information: Treasury Bills, other than providing short-term cushion against the government also function as short-term investment avenues for the banks and financial institutions, besides functioning as requirements of the CRR and SLR of the banking institutions. RBI is Banker / Debt manager for both State and Union Government. However, presently t-bills are issued only by central government and not state governments. Tbills are sold at discount and re-purchased at par value (face value). -
Question 3 of 5
3. Question
2 points3. Consider the following statements regarding Sovereign Gold Bonds:
1. These bonds are denominated in multiples of grams of gold with a basic minimum unit of 100 grams of gold.
2. They cannot be used as collateral for loans as they are not physical gold.
3. They are tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.
Which of the statements given above is/are correct?Correct
Answer: C
Explanation:
● Statement 1 is incorrect: These bonds are denominated in multiples of grams of gold with a basic unit of 1 gram of gold (which is the minimum investment allowed in SGB).
● Statement 2 is incorrect: Sovereign gold bonds can also be used as collateral for loans.
● Statement 3 is correct: They are tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.
Additional information: Sovereign Gold bonds can be held as substitutes for physical gold . For subscription, investors will have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. Bonds come with a maturity period of 8 years, with an exit option from the fifth year The Quantity of gold for which the investor pays is protected, since he receives the on-going market price at the time of redemption. The objective of the bonds is to reduce the country’s dependence on gold imports and increase domestic supply. The bond is issued by the RBI on behalf of the government. The bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices, and stock exchanges – BSE and NSE. The gold bonds pay interest at the rate of 2.50% per annum on the amount of initial investment. Interest is credited semi-annually. The interest is taxable. TDS is not applicable on the bond. But capital gains tax arising from redemption of sovereign gold bonds has been exempted. Sovereign gold bonds can also be used as collateral for loans.Incorrect
Answer: C
Explanation:
● Statement 1 is incorrect: These bonds are denominated in multiples of grams of gold with a basic unit of 1 gram of gold (which is the minimum investment allowed in SGB).
● Statement 2 is incorrect: Sovereign gold bonds can also be used as collateral for loans.
● Statement 3 is correct: They are tradable on stock exchanges within a fortnight of the issuance on a date as notified by the RBI.
Additional information: Sovereign Gold bonds can be held as substitutes for physical gold . For subscription, investors will have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. Bonds come with a maturity period of 8 years, with an exit option from the fifth year The Quantity of gold for which the investor pays is protected, since he receives the on-going market price at the time of redemption. The objective of the bonds is to reduce the country’s dependence on gold imports and increase domestic supply. The bond is issued by the RBI on behalf of the government. The bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices, and stock exchanges – BSE and NSE. The gold bonds pay interest at the rate of 2.50% per annum on the amount of initial investment. Interest is credited semi-annually. The interest is taxable. TDS is not applicable on the bond. But capital gains tax arising from redemption of sovereign gold bonds has been exempted. Sovereign gold bonds can also be used as collateral for loans. -
Question 4 of 5
4. Question
2 points4. With reference to Decentralised Procurement Scheme, consider the following statements:
1. The scheme is implemented by the states but funded by the Central government.
2. Under this scheme, Food Corporation of India (FCI) undertakes direct purchase and procurement of foodgrains on behalf of the Government of India.
3. The scheme is mandatory for states to implement in their respective areas.
Which of the statements given above is/are correct?Correct
Answer: A
Explanation:
• Statement 1 is correct: The scheme is implemented by the states but funded by the Central government.
• Statement 2 is incorrect: Under this scheme, respective state governments themselves undertake direct purchase and procurement of foodgrains on behalf of the Government of India.
• Statement 3 is incorrect: The scheme is not yet mandatory for states to implement.
Additional information: Decentralized Procurement Scheme of food-grains mainly rice and wheat was launched by the Centre in 1997-98. This was done to enhance efficiency of procurement and public distribution and to extend the benefits of MSP to local farmers. A few states have already adopted this scheme and the central government is urging all state governments to adopt the DCP scheme so that costs of distribution can be saved and it brings the benefits of Minimum Support Price at the doorstep of every local farmer. The scheme ensures that MSP is passed on to the farmers, to enhance the efficiency of procurement by making them available as per the requirements of local taste. The scheme is implemented by the states but funded by Central government.Incorrect
Answer: A
Explanation:
• Statement 1 is correct: The scheme is implemented by the states but funded by the Central government.
• Statement 2 is incorrect: Under this scheme, respective state governments themselves undertake direct purchase and procurement of foodgrains on behalf of the Government of India.
• Statement 3 is incorrect: The scheme is not yet mandatory for states to implement.
Additional information: Decentralized Procurement Scheme of food-grains mainly rice and wheat was launched by the Centre in 1997-98. This was done to enhance efficiency of procurement and public distribution and to extend the benefits of MSP to local farmers. A few states have already adopted this scheme and the central government is urging all state governments to adopt the DCP scheme so that costs of distribution can be saved and it brings the benefits of Minimum Support Price at the doorstep of every local farmer. The scheme ensures that MSP is passed on to the farmers, to enhance the efficiency of procurement by making them available as per the requirements of local taste. The scheme is implemented by the states but funded by Central government. -
Question 5 of 5
5. Question
2 points5. Consider the following statements regarding fixed and floating exchange rate in India:
1. Fixed exchange rate is determined by the central government whereas floating exchange rate is determined by the central bank of the country.
2. In fixed exchange rate there is need to maintain foreign reserves whereas in floating exchange rate there is no need to maintain foreign reserves.
Which of the statements given above is/are correct?Correct
Answer: B
Explanation:
• Statement 1 is incorrect: Fixed exchange rate is determined by the central government whereas floating exchange rate is determined by demand and supply forces.
• Statement 2 is correct: In fixed exchange rate there is need to maintain foreign reserves whereas in floating exchange rate there is no need to maintain foreign reserve.
Additional information: A fixed exchange rate denotes a nominal exchange rate that is set firmly by the monetary authority with respect to a foreign currency or a basket of foreign currencies. By contrast, a floating exchange rate is determined in foreign exchange markets depending on demand and supply, and it generally fluctuates constantly.Incorrect
Answer: B
Explanation:
• Statement 1 is incorrect: Fixed exchange rate is determined by the central government whereas floating exchange rate is determined by demand and supply forces.
• Statement 2 is correct: In fixed exchange rate there is need to maintain foreign reserves whereas in floating exchange rate there is no need to maintain foreign reserve.
Additional information: A fixed exchange rate denotes a nominal exchange rate that is set firmly by the monetary authority with respect to a foreign currency or a basket of foreign currencies. By contrast, a floating exchange rate is determined in foreign exchange markets depending on demand and supply, and it generally fluctuates constantly.
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