Redy For Exam

Chapter 2 Overview of the Financial System
2.1 Multiple Choice Questions

1) Every financial market has the following characteristic:
A) It determines the level of interest rates.
B) It allows common stock to be traded.
C) It allows loans to be made.
D) It channels funds from lenders-savers to borrowers-spenders.
Answer: D
2) Financial markets have the basic function of
A) bringing together people with funds to lend and people who want to
borrow
funds.
B) assuring that the swings in the business cycle are less pronounced.
C) assuring that governments need never resort to printing money.
D) both (A) and (B) of the above.
E) both (B) and (C) of the above.
Answer: A
3) Which of the following can be described as involving direct finance?
A) A corporation’s stock is traded in an over-the-counter market.
B) People buy shares in a mutual fund.
C) A pension fund manager buys commercial paper in the secondary
market.
D) An insurance company buys shares of common stock in the over-the-
counter
markets.
E) None of the above.
Answer: E
4) Which of the following can be described as involving direct finance?
A) A corporation’s stock is traded in an over-the-counter market.
B) A corporation buys commercial paper issued by another corporation.
C) A pension fund manager buys commercial paper from the issuing
corporation.
D) Both (A) and (B) of the above.
E) Both (B) and (C) of the above.
Answer: E
5) Which of the following can be described as involving indirect
finance?
A) A corporation takes out loans from a bank.
B) People buy shares in a mutual fund.
C) A corporation buys commercial paper in a secondary market.
D) All of the above.
E) Only (A) and (B) of the above.
Answer: D
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6) Which of the following can be described as involving indirect
finance?
A) A bank buys a U.S. Treasury bill from one of its depositors.
B) A corporation buys commercial paper issued by another corporation.
C) A pension fund manager buys commercial paper in the primary
market.
D) Both (B) and (C) of the above.
Answer: A
7) Financial markets improve economic welfare because
A) they allow funds to move from those without productive investment
opportunities to those who have such opportunities.
B) they allow consumers to time their purchases better.
C) they weed out inefficient firms.
D) they do all of the above.
E) they do (A) and (B) of the above.
Answer: E
8) Which of the following are securities?
A) A certificate of deposit
B) A share of Texaco common stock
C) A Treasury bill
D) All of the above
E) Only (A) and (B) of the above
Answer: D
9) Which of the following statements about the characteristics of debt
and equity are
true?
A) They can both be long-term financial instruments.
B) They both involve a claim on the issuer’s income.
C) They both enable a corporation to raise funds.
D) All of the above
Answer: D
10) Which of the following are long-term financial instruments?
A) A negotiable certificate of deposit
B) A banker’s acceptance
C) A U.S. Treasury bond
D) A U.S. Treasury bill
Answer: C
11) Which of the following are short-term financial instruments?
A) A negotiable certificate of deposit
B) A banker’s acceptance
C) A U.S. Treasury bond
D) Both (A) and (B) of the above
E) Both (B) and (C) of the above
Answer: D
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12) Which of the following are short-term financial instruments?
A) A banker’s acceptance
B) A share of Walt Disney Corporation stock
C) A Treasury note with a maturity of 4 years
D) All of the above
Answer: A
13) Which of the following are primary markets?
A) The New York Stock Exchange
B) The U.S. government bond market
C) The over-the-counter stock market
D) The options markets
E) None of the above
Answer: E
14) Which of the following are secondary markets?
A) The New York Stock Exchange
B) The U.S. government bond market
C) The over-the-counter stock market
D) The options markets
E) All of the above
Answer: E
15) A corporation acquires new funds only when its securities are sold
A) in the secondary market by an investment bank.
B) in the primary market by an investment bank.
C) in the secondary market by a stock exchange broker.
D) in the secondary market by a commercial bank.
Answer: B
16) Intermediaries who are agents of investors and match buyers with
sellers of securities
are called
A) investment bankers.
B) traders.
C) brokers.
D) dealers.
E) none of the above.
Answer: C
17) Intermediaries who link buyers and sellers by buying and selling
securities at stated
prices are called
A) investment bankers.
B) traders.
C) brokers.
D) dealers.
E) none of the above.
Answer: D
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18) An important financial institution that assists in the initial sale of
securities in the
primary market is the
A) investment bank.
B) commercial bank.
C) stock exchange.
D) brokerage house.
Answer: A
19) Which of the following statements about financial markets and
securities are true?
A) Most common stocks are traded over-the-counter, although the
largest
corporations have their shares traded at organized stock exchanges such
as the
New York Stock Exchange.
B) A corporation acquires new funds only when its securities are sold in
the
primary market.
C) Money market securities are usually more widely traded than longer-
term
securities and so tend to be more liquid.
D) All of the above are true.
E) Only (A) and (B) of the above are true.
Answer: D
A) A bond is a long-term security that promises to make periodic
payments called
dividends to the firm’s residual claimants.
B) A debt instrument is intermediate term if its maturity is less than one
year.
C) A debt instrument is long term if its maturity is ten years or longer.
D) The maturity of a debt instrument is the time (term) to that
instrument’s
expiration date.
Answer: C
A) Few common stocks are traded over-the-counter, although the over-
the-counter
markets have grown in recent years.
B) A corporation acquires new funds only when its securities are sold in
the
primary market.
C) Capital market securities are usually more widely traded than longer
term
securities and so tend to be more liquid.
D) All of the above are true.
E) Only (A) and (B) of the above are true.
Answer: B
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22) Which of the following markets is sometimes organized as an over-
the-counter
market?
A) The stock market
B) The bond market
C) The foreign exchange market
D) The federal funds market
E) all of the above
Answer: E
23) Which of the following instruments is not traded in a money market?
A) Banker’s acceptances
B) U.S. Treasury Bills
C) Eurodollars
D) Commercial paper
Answer: E
24) Which of the following instruments is not traded in a money market?
A) Banker’s acceptances
B) U.S. Treasury Bills
C) Eurodollars
D) Commercial paper
E) Residential mortgages
Answer: E
25) Which of the following instruments are traded in a capital market?
A) U.S. government agency securities
B) Negotiable bank CDs
C) Repurchase agreements
D) Eurodollars
Answer: A
26) Which of the following instruments are traded in a capital market?
A) Corporate bonds
B) U.S. Treasury bills
C) Banker’s acceptances
D) Repurchase agreements
Answer: A
27) Bonds that are sold in a foreign country and are denominated in that
country’s
currency are known as
A) foreign bonds.
B) Eurobonds.
C) Eurocurrencies.
D) Eurodollars.
Answer: A
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28) Bonds that are sold in a foreign country and are denominated in a
currency other than
that of the country in which they are sold are known as
A) foreign bonds.
B) Eurobonds.
C) Eurocurrencies.
D) Eurodollars.
Answer: B
29) Financial intermediaries
A) exist because there are substantial information and transaction costs
in the
economy.
B) improve the lot of the small saver.
C) are involved in the process of indirect finance.
D) do all of the above.
E) do only (A) and (B) of the above.
Answer: D
30) The main sources of financing for businesses, in order of
importance, are
A) financial intermediaries, issuing bonds, issuing stocks.
B) issuing bonds, issuing stocks, financial intermediaries.
C) issuing stocks, issuing bonds, financial intermediaries.
D) issuing stocks, financial intermediaries, issuing bonds.
Answer: A
31) The presence of transaction costs in financial markets explains, in
part, why
A) financial intermediaries and indirect finance play such an important
role in
financial markets.
B) equity and bond financing play such an important role in financial
markets.
C) corporations get more funds through equity financing than they get
from
financial intermediaries.
D) direct financing is more important than indirect financing as a source
of funds.
Answer: A
32) Financial intermediaries can substantially reduce transaction costs
per dollar of
transactions because their large size allows them to take advantage of
A) poorly informed consumers.
B) standardization.
C) economies of scale.
D) their market power.
Answer: C
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33) The presence of _____ in financial markets leads to adverse
selection and moral
hazard problems that interfere with the efficient functioning of financial
markets.
A) noncollateralized risk
B) free-riding
C) asymmetric information
D) costly state verification
Answer: C
34) When the lender and the borrower have different amounts of
information regarding a
transaction, ______________ is said to exist.
A) asymmetric information
B) adverse selection
C) moral hazard
D) fraud
Answer: A
35) When the potential borrowers who are the most likely to default are
the ones most
actively seeking a loan, ______________ is said to exist.
C) moral hazard
D) fraud
Answer: B
36) When the borrower engages in activities that make it less likely that
the loan will be
repaid, _____________ is said to exist.
C) moral hazard
D) fraud
Answer: C
37) The concept of adverse selection helps to explain
A) which firms are more likely to obtain funds from banks and other
financial
intermediaries, rather than from the securities markets.
B) why indirect finance is more important than direct finance as a source
of
business finance.
C) why direct finance is more important than indirect finance as a source
of
business finance.
D) only (A) and (B) of the above.
E) only (A) and (C) of the above.
Answer: D
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38) Adverse selection is a problem associated with equity and debt
contracts arising from
A) the lender’s relative lack of information about the borrower’s
potential returns
and risks of his investment activities.
B) the lender’s inability to legally require sufficient collateral to cover a
100
percent loss if the borrower defaults.
C) the borrower’s lack of incentive to seek a loan for highly risky
investments.
D) none of the above.
Answer: A
39) When the least desirable credit risks are the ones most likely to seek
loans, lenders are
subject to the
A) moral hazard problem.
B) adverse selection problem.
C) shirking problem.
D) free-rider problem.
E) principal-agent problem.
Answer: B
40) Financial institutions expect that
A) moral hazard will occur, as the least desirable credit risks will be the
ones most
likely to seek out loans.
B) opportunistic behavior will occur, as the least desirable credit risks
will be the
ones most likely to seek out loans.
C) borrowers will commit moral hazard by taking on too much risk, and
this is
what drives financial institutions to take steps to limit moral hazard.
D) none of the above will occur.
Answer: B
41) Successful financial intermediaries have higher earnings on their
investments because
they are better equipped than individuals to screen out good from bad
risks, thereby
reducing losses due to
A) moral hazard.
B) adverse selection.
C) bad luck.
D) financial panics.
Answer: B
42) In financial markets, lenders typically have inferior information
about potential
returns and risks associated with any investment project. This difference
in
information is called
A) comparative informational disadvantage.
B) asymmetric information.
C) variant information.
D) caveat venditor.
Answer: B
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43) The largest depository institution at the end of 2001 was
A) life insurance companies.
B) pension funds.
C) state retirement funds.
D) none of the above.
Answer: D
44) The value of assets held by commercial banks in 2001 was $6.7
trillion dollars,
making commercial banks the
A) second most important sector of financial intermediaries after mutual
funds.
B) second most important sector of financial intermediaries after life
insurance companies.
C) second most important sector of financial intermediaries after private
pension funds.
D) largest sector of financial intermediaries.
Answer: D
45) Which of the following financial intermediaries are depository
institutions?
A) A savings and loan association
B) A commercial bank
C) A credit union
D) All of the above
E) Only (A) and (C) of the above
Answer: D
46) Which of the following is a contractual savings institution?
A) A life insurance company
B) A credit union
C) A savings and loan association
D) A mutual fund
Answer: A
47) Which of the following are not investment intermediaries?
A) A life insurance company
B) A pension fund
C) A mutual fund
D) Only (A) and (B) of the above
Answer: D
48) Which of the following are investment intermediaries?
A) Finance companies
B) Mutual funds
C) Pension funds
D) All of the above
Answer: E
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49) The government regulates financial markets for three main reasons:
A) to ensure soundness of the financial system, to improve control of
monetary
policy, and to increase the information available to investors.
B) to improve control of monetary policy, to ensure that financial
intermediaries
earn a normal rate of return, and to increase the information available to
investors.
C) to ensure that financial intermediaries do not earn more than the
normal rate of
return, to ensure soundness of the financial system, and to improve
control of
monetary policy.
D) to ensure soundness of financial intermediaries, to increase the
information
available to investors, and to prevent financial intermediaries from
earning less
than the normal rate of return.
Answer: A
50) Asymmetric information can lead to widespread collapse of financial
intermediaries,
referred to as a
A) bank holiday.
B) financial panic.
C) financial disintermediation.
D) financial collapse.
Answer: B
2.2 True/False
1) Every financial market allows loans to be made.
Answer: FALSE
2) An example of direct financing is if you were to lend money to your
neighbor.
Answer: TRUE
3) The New York Stock Exchange is an example of a primary market.
Answer: FALSE
4) Commercial paper is not traded in the capital market.
Answer: TRUE
5) Eurodollars are traded in the money market.
Answer: TRUE
6) The process of financial intermediation is also known as direct
finance.
Answer: FALSE
7) A mutual fund is not a depository institution.
Answer: TRUE
8) A pension fund is not a contractual savings institution.
Answer: FALSE
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9) Equity represents an ownership interest in a firm and entitles the
holder to the
residual cash flows.
Answer: TRUE
10) Adverse selection refers to those most at risk being most aggressive
in their search
for funds.
Answer: FALSE
2.3 Essay
1) Distinguish between direct financing and indirect financing.
2) Distinguish between primary markets and secondary markets.
3) Why is it so important for an economy to have fully developed
financial markets?
4) Why are financial intermediaries so important to an economy?
5) Describe how over-the-counter markets work.
6) What are adverse selection and moral hazard?
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2. MCQs
Financial Institutions & Markets
Chapter-02: Financial Intermediaries
Section # 1 IN
Which item below is not one of the five parts of the Financial System?
A) Money
B) Central banks
C) Financial Markets
D) Credit cards
Q#22 CORRECT
In the United States control of the money supply is given to:
A) the President.
B) Congress.
C) the Secretary of the Treasury.
D) the Federal Reserve.
Q#3
Which of the following statements best describes financial markets?
A) Financial markets raise the cost and increase the speed of buying and selling
financial instruments since people are earning fees for these transactions.
B) Financial markets increase the speed of buying and selling, and they also
decrease the cost.
C) Financial markets are a good example of unregulated markets.
D) b and c
Q#4
The New York Stock Exchange is an example of:
A) a financial instrument.
B) a central bank.
C) a financial market.
Q#5
Which of the following is NOT an accurate description of a trend associated with the
U.S. financial system over the last few decades?
A) It has become easier to withdraw funds from checking accounts.
B) Financial innovations have made it easier for lower income households
to participate in financial markets through the use of mutual funds.
C) Banks have provided an expanding mix of services
D) The Fed has become more secretive concerning its policy actions .
Q#6
Which of the following is NOT likely to be a goal of a central bank?
A) encouraging the use of paper currency instead of checking deposits
B) maintaining a low inflation rate
C) encouraging economic growth
D) maintaining a stable financial system
Q#7
The five core principles of Money and Banking include each of the following except:
A) all people act rationally .
B) time has value.
C) information is the basis for decisions.
D) risk requires compensation.
Q#8
The amount that a typical person would be willing to give up today (in the absence of
anticipated deflation) to receive $1,000 next year is:
A) less than $1,000.
B) equal to $1,000.
C) greater than $1,000.
D) more or less than $1,000, depending on the level of the interest rate.
Q#9
When an individual obtains a student loan and makes all of the regular monthly
payments, the sum of the payments made will exceed the initial amount of the loan.
This is due primarily to the core principle that states that:
A) most people do not pay back student loans.
B) time has value.
C) markets are sometimes inefficient at allocating resources.
D) information is the basis for decisions.
Q#10
Banks usually offer lower rates of interest to people willing to keep their funds in the
bank for a short time because:
A) the banks really do not want these people as customers.
B) banks really do not want a lot of people coming into the bank.
C) bankers realize time has value and people need to be compensated if they are
to keep their money in the bank longer.
Q#11
The statement "risk requires compensation" implies:
A) people only accept risk when they absolutely have to.
B) people will only accept risk when they are rewarded for doing so.
C) people do not take risk.
D) people will pay to avoid risk.
E) b and d
Q#12
The principle that "risk requires compensation" does NOT explain why:
A) junk bonds provide a higher average return than do high-grade corporate bonds.
B) college students pay high interest rates on credit cards than do adults with
established credit histories.
C) the interest rate is higher on 5-year CDs than on 1-year CDs .
D) individuals with poor credit ratings must pay higher interest rates on car
Q#13
The core principles of money and banking would imply that if more students didn't pay
back their student loans:
A) student loans may become more difficult to obtain.
B) the interest rate on student loans would increase.
C) fewer people may attend college.
Q#14
Monetary policy is best described as:
A) attempts to keep inflation constant.
B) determining the denominations and supply of a country's currency.
C) one of the most important functions of Congress.
D) attempts to keep inflation low and stable and growth high and
Q#15
When an individual is faced with a choice between receiving a random income that on
average equals $40,000 per year or a certain income of $40,000 per year, most
individuals prefer the certain income to the one that varies because:
A) information is the basis for decisions.

B) stability improves welfare.
C) markets determine prices and allocate resources.
D) time has value.
Q#16
A bank is an example of:
A) a financial instrument.
B) a financial market.
C) a financial institution
D) None of the above is correct.
Q#17
Financial instruments are:
A) used to transfer resources from savers to investors.
B) used to transfer risk.
C) sold in financial markets.
D) All of the above are correct.
Q#`18
Money:
A) consists solely of currency.
B) consists solely of gold and silver coins.
C) is used to purchase goods and services and to store wealth .
D) is only rarely used to pay for transactions today.
Q # 19
Which of the following correctly describes trends associated with financial instruments in
the U.S.?
A) Transactions have become relatively more costly over time due to rising brokerage
fees.
B) Mutual funds now allow less wealthy households to purchase a share of a
diversified collection of financial assets at a relatively low cost .
C) The variety of types of financial instruments that are sold in financial markets has
been reduced substantially over time.
D) The use of electronic networks to trade financial instruments has declined during the
past 5 years in response to fears over the reliability and security of
Q#20
The central bank for the U.S. today is:
A) the U.S. Treasury.
B) the Federal Reserve.
C) the First Bank of the U.S.
D) the Second Bank of the U.S.
Q#21
Mutual funds pool the funds of savers and use them to buy:
A) shares in mutual savings banks only.
B) a variety of financial instruments .
C) shares in the Federal Reserve system.
Q#22
The variety of financial services offered by banks has _______ over the past 50 years.
A) expanded
B) contracted
C) remained the same
D) expanded and contracted periodically, but with a general downward trend in the
range of services provided
Q#23
After graduation from college, students observe that the total amount of their student
loan payments is substantially greater than the amount that was borrowed. This occurs
because:
A) the government forces students to pay excessively high interest rate compared to the
interest rates that students pay on loans from credit card companies.
B) lenders must be compensated for giving up the use of funds since time has
value.
C) default rates on student loans are much higher than on credit card loans.
Q#24
Long-term government bonds offer higher interest rates than short-term government
bonds, in part, because:
A) individuals must be compensated if they are to give up the use of their funds
for longer periods.
B) the government wishes to discourage people from buying short-term bonds.
C) the higher interest rates on long-term bonds are really a marketing gimmick and are
actually equivalent to the interest that would be received if people held a sequence of
short-term bonds over the longer time period.
Q# 25
Individuals with poor credit scores are charged higher interest rates because:
A) time has value.
B) risk requires compensation.
C) stability improves welfare.
Q#26
Insurance companies receive more in premium payments in a typical year than they pay
out in claims because:
A) those that are buying the insurance are not aware they're overpaying for these
services.
B) individuals and firms are willing to pay a premium to transfer risk to the
insurance company.
C) insurance companies don't generally manage their portfolios of financial assets very
well.
Q#27
In well-developed financial markets, the value of stocks or bonds offered by a given
company is determined by:
A) government regulators.
B) the Securities and Exchange Commission.
C) the interaction of buyers and sellers in stock and bond markets .
D) the pricing authorities of the Federal Reserve Board of Governors.
Q # 28
Since stability improves welfare, the Federal Reserve is charged with the task of:
A) guaranteeing that a job exists for every worker.
B) deterring technological change that may cause some workers to be replaced by
machines.
C) keeping the price of each and every good constant over time.
D) maintaining low and stable inflation and high and stable economic growth .
Q#29
Because "risk requires compensation:"
A) automotive insurance premiums are higher for new drivers than for more
experienced drivers.
B) junk bonds offer higher interest rates than bonds issued by companies with higher
credit ratings.
C) college students pay higher rates for credit cards than do individuals with an
established (and positive) credit history.
Q# 30
The core principles of money and banking imply that:
A) most people would prefer a variable income that averages to $70,000 per year to a
certain income of $70,000 per year.
B) junk bonds will offer lower interest rates than other corporate bonds.
C) individuals benefit when the Fed is able to reduce cyclical fluctuations in
output and prices.
D) most stock and bond prices are determined primarily by government pricing
authorities.
Q#31
Transaction costs in financial markets have increased over time due to decreased
competition in financial markets.
A) True
B) False
Q#32
The U.S. Treasury is charged with the task of adjusting the money supply to achieve
low
and stable inflation and high and stable economic growth.
A) True
B) False
Q#34
An increase in the perceived risk associated with corporate bonds will cause the interest
rate on corporate bonds to increase.
A) True
B) False
Q # 35
Individuals will devote more resources to acquiring information when the expected
benefits from acquiring the information are higher.
A) True
B) False
Q # 36
The rate of economic growth tends to be higher in countries that experience high and
unstable inflation rates.
A) True
B) False
Q#371 CORRECT
Which of the following would be considered a characteristic of money?
A) It is a store of value.
B) It pays a higher return than most assets.
C) It is in fixed supply.
D) It is legal tender everywhere in the world.
Q#38
A society without any money:
A) would likely find people specializing more than they do now.
B) would find people doing everything for themselves.
C) would have to rely strictly on barter.
D) would be more productive since people would be more self-sufficient.
Q#39
Which best describes money as a means of payment?
A) The use of money makes it more difficult to achieve a double coincidence of wants.
B) A double coincidence of wants with money never occurs.
C) The use of money makes it easier to achieve a double coincidence
of wants.
D) It is impossible to obtain a double coincidence of wants without using money.
Q#40
How many relative prices would there be in a barter economy with 10 goods?
A) 20
B) 45
C) 90
D) 100
Q#41
While money is an asset not all assets are money because:
A) an asset can be money only if it serves as a means of payment.
B) only money can store value over time.
C) only money maintains its value as a store of wealth during times of inflation.
D) an item can serve as money only if it is legal tender.
Q#42
In comparing money to a share of Microsoft stock held by an individual we can say:
A) the stock is an asset but money is not.
B) both are stores of value.
C) money is an asset but the stock is a liability of the individual.
D) the stock is a store of value but the money isn't.
Q#46
Individuals who store their wealth in stamps rather than money will find:
A) they will suffer larger real losses during periods of high inflation.
B) they have far more liquidity than most savers.
C) will incur higher transaction costs when they ultimately make purchases .
Q#47
Money serves as a unit of account when it is used to:
A) quote prices and record debts.
B) store an individual's wealth over time.
C) protect wealth from declining in value as a result of inflation.
Q#48
Which of the following could be used as commodity money?
A) $20 dollar bills
B) gold coins
C) checking deposits
Q# 49
Which of the following is a form of fiat money?
A) gold coins
B) checking deposits
C) U.S. currency
Q#50
Checks are:
A) a means of payment.
B) money.
C) not a promise of any kind.
D) not acceptable by the U.S. government for payment of taxes.
Q#51
An decrease in the number of credit cards issued:
A) has the same impact on the economy as the Federal Reserve supplying less money.
B) reduces the money supply since credit cards act like money.
C) would probably lower the amount in M2 but would probably not affect1.
D) None of the above.
Q#52
Tom uses a credit card to purchase a new pair of jeans. Tom is:
A) using money to buy his jeans since credit cards are money.
B) using a form of money included in M2.
C) is using an electronic payment form of money that is in the category of checking
deposits.
D) creating a liability that is ultimately paid with money.
Q#53
A monetary aggregate can best be defined as:
A) the amount of money the Federal Reserve is targeting for the economy.
B) the amount of money measured at a particular point in time .
C) the average amount of money available to the economy over a year.
D) the amount of U.S. currency the Bureau of Printing and Engraving has produced.
Q# 54
The monetary aggregate M1 does not include:
A) currency in the hands of the public.
B) traveler's checks that have been issued.
C) currency in the vaults of commercial banks .
D) demand deposits at commercial banks.
Q#55
The monetary aggregate M2 includes each of the following EXCEPT:
A) small denomination time deposits.
B) retail money market mutual fund shares.
C) U.S. Treasury bills.
D) M1.
Chapter- Determination of Interest Rates
MULTIPLE CHOICE (MCQs)
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1) The term structure of interest rates is
A) the structure of how interest rates move over time.
B) the relationship among interest rates of different bonds with the same maturity.
C) the relationship among the term to maturity of different bonds.
D) the relationship among interest rates on bonds with different maturities.
2) When the default risk in corporate bonds decreases, other things equal, the demand
curve for corporate bonds shifts to the _____ and the demand curve for Treasury bonds
shifts to the _____.
A) right; left
B) right; right
C) left; right
D) left; left
3) When the Treasury bond market becomes more liquid, other things equal, the demand
curve for corporate bonds shifts to the _____ and the demand curve for Treasury bonds
shifts to the _____.
A) right; left
B) right; right
C) left; left
D) left; right
4) The risk premium on corporate bonds becomes smaller if

A) both (b) and (d) occur.
B) the liquidity of corporate bonds increases.
C) the riskiness of corporate bonds increases.
D) the riskiness of corporate bonds decreases.
E) the liquidity of corporate bonds decreases.
5) The interest rate on municipal bonds falls relative to the interest rate on Treasury
securities when
A) income tax rates are raised.
B) there is a major default in the municipal bond market.
C) corporate bonds become riskier.
D) municipal bonds become less widely traded.
E) none of the above occur.
6) The liquidity premium theory of the term structure

A) suggests that markets for bonds of different maturities are completely separate because people
have preferred habitats.
B) indicates that today's long-term interest rate equals the average of short-term interest rates that
people expect to occur over the life ofthe long-term bond.
C) assumes that bonds of different maturities are perfect substitutes.
D) does none of the above.
7) Which of the following theories of the term structure is (are) able to explain the fact that
interest rates on bonds of different maturities tend to move together over time?
A) The expectations theory
B) The segmented markets theory
C) The liquidity premium theory
D) Both (a) and (b) of the above
E) Both (a) and (c) of the above
8) If the expected path of one-year interest rates over the next five years is 4 percent, 5
percent, 7 percent, 8 percent, and 6 percent, then the expectations theory predicts that
today's interest rate on the fiveyearbond is
A) 8 percent.
B) 4 percent.
C) 5 percent.
D) 6 percent.
E) 7 percent.
9) Factors that influence interest rates on bonds include

A) term to maturity.
B) risk.
C) liquidity.
D) tax considerations.
E) all of the above.
10) Yield curves can be classified as

A) downward sloping.
B) upward sloping.
C) flat.
D) all of the above.
E) only (a) and (b) of the above.
11) The government institution that has responsibility for the amount of money and credit
supplied in the economy as a whole is the
A) central bank.
B) monetary fund.
C) bank of settlement.
D) commercial bank.
12) The regulatory system that has evolved in the United States whereby banks are
regulated at the state level, the national level, or both, is known as a
A) two-tiered regulatory system.
B) bilateral regulatory system.
C) tiered regulatory system.
D) dual banking system.
13) With the creation of the Federal Deposit Insurance Corporation, member banks of the
Federal Reserve System _____ to purchase FDIC insurance for their depositors, while non-
member commercial banks _____ to buy deposit insurance.
A) were required, could choose
B) were required; were required
C) could choose; were required
D) could choose; were given the option
14) The presence of so many commercial banks in the United States is most likely the result
of
A) adverse selection and moral hazard problems that give local banks acompetitive advantage
over larger banks.
B) regulations that restrict the ability of these financial institutionsto open branches.
C) consumers' strong desire for dealing with only local banks.
15) Financial innovation has caused

A) banks to suffer declines in their cost advantages in acquiring funds,although it has not caused
a decline in income advantages.
B) banks to achieve competitive advantages in both costs and income.
C) banks to suffer declines in their income advantages in acquiringfunds, although it has not
caused a decline in cost advantages.
D) banks to suffer a simultaneous decline of cost and income advantages.
17) Moral hazard is an important feature of insurance arrangements because the existence
of insurance
A) provides increased incentives for risk taking.
B) causes the private cost of the insured activity to increase.
C) is a hindrance to efficient risk taking.
D) both (a) and (b) of the above.
E) both (b) and (c) of the above.
18) The result of the too-big-to-fail policy is that _____ banks will take on _____ risks,
making bank failures more likely.
A) big; greater
B) big; fewer
C) small; fewer
D) small; greater
19) Ways in which bank regulations reduce the adverse selection and moral hazard
problems in banking include
A) restrictions that prevent banks from acquiring certain risky assets, such as common stocks.
B) high bank capital requirements to increase the cost of bank failureto the owners.
C) a chartering process designed to prevent crooks from getting control of a bank.
20) One way for bank regulators to assure depositors that banks are not taking on too
much risk is to require that banks
A) reduce its equity capital.
B) diversify its loan portfolio.
C) reduce the size of its loan portfolio.
D) do both (a) and (b) of the above.
E) do both (b) and (c) of the above.
21) The chartering process is especially designed to deal with the _____ problem, and
regular bank examinations help to reduce the _____ problem.
A) adverse selection; adverse selection
B) moral hazard; moral hazard
C) moral hazard; adverse selection
D) adverse selection; moral hazard
22) Common to all the recent banking crises in the United States, Scandinavia, Latin
America, Japan, Russia, and Eastern Europe was the
A) the banks' lack of expertise in screening borrowers and monitoring
loans.
B) the financial liberalization that occurred in the 1980s.
C) the regulators' lack of expertise in monitoring banking activities.
23) Which of the following is not an entity of the Federal Reserve System?
A) The FDIC
B) The Board of Governors
C) The Board of Advisors
D) Federal Reserve Banks
24) Banks subject to reserve requirements set by the Federal Reserve System include
A) only state chartered banks.
B) all banks whether or not they are members of the Federal Reserve System.
C) only banks with assets less than $500 million .
D) only nationally chartered banks.
E) only banks with assets less than $100 million.
25) The Board of Governors

A) effectively sets the discount rate.
B) sets margin requirements.
C) establishes, within limits, reserve requirements.
D) does all of the above.
E) does only (a) and (b) of the above.
26) The Federal Reserve entity that determines monetary policy strategy is the
A) Board of Governors.
B) Shadow Open Market Committee.
C) Federal Open Market Committee.
D) chairman of the Board of Governors.
27) Factors that provide the Federal Reserve with a high degree of autonomy include
A) a source of revenue free from the appropriations process.
B) 14-year terms for members of the Board of Governors.
C) a four-year term for the chairman of the Board of Governors that does not coincide with the
president's four-year term.
28) According to the author of your textbook, the Fed is

A) severely constrained in its policy making by the congressional threat to reduce Fed
independence.
B) remarkably free of the political pressures that influence other government agencies.
C) more responsive to the political pressures that influence other government agencies.
D) both (a) and (c) of the above.
29) The theory of bureaucratic behavior suggests that the Federal Reserve will
A) try to gain regulatory power over more banks.
B) devise clever strategies in an effort to avoid blame for poor economic performance.
C) try to avoid a conflict with the President and Congress over increases in interest rates.
D) do each of the above.
30) Federal Reserve independence is thought to

A) introduce a short-term bias to monetary policymaking.
B) introduce longer-run considerations to monetary policymaking.
C) lead to better fiscal and monetary policy coordination.
D) do both (a) and (b) of the above.
31) The case for Federal Reserve independence includes the idea that
A) political pressure would impart an inflationary bias to monetary policy.
B) a Federal Reserve under the control of Congress or the President might make the so-
calledpolitical business cycle more pronounced.
C) a politically insulated Fed would be more concerned with long-run objectives and thus be a
defender of a sound dollar and a stable price level.
32) Critics of Fed independence argue

A) that an independent Fed conducts monetary policy with a consistent inflationary bias.
B) that it is undemocratic to have monetary policy controlled by anelite group responsible to no
one.
C) that the Fed, since it does not face a binding budget constraint, spends too much of its
earnings.
D) only (a) and (b) of the above.
Financial Institutions and Financial Markets
Quiz # 04
Q#1
The future value in 1 year of $300 deposited today at a 6% annual interest rate is:
A) $282.00
B) $318.00
C) $306.00
Q#2
Which of the following expresses 6.5%?
A) 0.0065
B) 6.50
C) 0.650
D) 0.0650
Q#3
Which of the following best expresses the proceeds a lender receives from a one-yearsimple loan
when it is paid back?
A) PV(1 + i)
B) FV/i
C) PV + i
D) PV/i
Q#4
Suppose that Joe receives a one-year simple loan from Bank A for $9,000.00. At the end
of the year Joe repays $9,720.00 to Bank A. The interest rate on Joe's loan was:
A) $800.
B) 7.2%.
C) 8.0%.
Q#5
Which of the following best expresses the payment a lender receives for lending his or
her money for four years?
A) PV(1+i)4
B) PV/(1 + i)4
C) 4PV
Q#6
An individual is promised a $1,000 payment one year from today. If she faces an interest
rate of 5%, how much would she would be willing to accept today in exchange for this
future payment?
A) $1005.00
B) $1050.00
C) $950.00
D) $952.38
Q#7
Mary deposits funds into a CD at her bank. The CD has an annual interest of 4.0%. If
Mary leaves the funds in the CD for entire two years she will have $1,081.60. What
amount is Mary depositing?
A) $960.60
B) $900.00
C) $1,005.00
D) $1,000.00
Q#8
The future value of $100 left in a savings account earning 4.5% for two and a half years
is best expressed by:
A) $100(1.045)3/2
B) $100( 0.45)2.5
C) $100(1.045)2.5
D) $100 x 2.5 x (1.045)
Q#9
The rule of 72 says that at a 6% interest rate an initial balance of $500 should become
$1,000 in about:
A) 7 years.
B) 8 years.
C) 12 years.
D) 6.94 years.
Q#10
The longer the time (n) until the payment:
A) the lower the present value.
B) the higher the present value because time is valuable.
C) the lower must be the interest rate.
Q#11
A change in the interest rate has:
Aa larger impact on the present value of a payment to be made far into the future than one
to be made sooner.
B will not have a difference on the present value of two equal payments to be made at different
times.
C) a smaller impact on the present value of a payment to be made far into the future than one to
be made sooner.
Q#12
An investment has grown from $100.00 to $160.00 or 60% over four years. What annual
increase results in a 60% increase over four years?
A) 7.50%
B) 12.47%
C) 15.00%
D) 13.24%
Q#13
People with a high discount rate will require:
A) a higher interest rate to entice them to save.
B) investment options with longer maturities.
C) a lower interest rate to entice them to save.
D) a and b
Q#14
If the internal rate of return from an investment is less than the opportunity cost of funds:
A) the firm should make the investment.
B) the firm should not make the investment.
C) the firm should only make the investment using retained earnings.
Q#15
A mortgage, where the monthly payments are not the same for the duration of the loan, is
an example of:
A) a variable payment loan.
B) an installment loan.
C) a fixed payment loan.
D) an equity security.
Q#16
An investment carrying a current cost of $130,000 is going to generate $70,000 of revenue in
each of the next three years. To calculate the internal rate of return we need to:
A) calculate the present value of each of the $70,000 payments and multiply these and set this
equal to $130,000.
B) take the present value of $210,000 for three years from now and set this equal to $130,000.
C) set the sum of the present value of $70,000 for each of the next three years equal to
$130,000.
D) subtract $130,000 from $210,000 and set this difference equal to the interest rate.
Q#17
The price of a bond is determined by:
A) taking the present value of the bond's final payment and subtracting the coupon payments.
B) taking the present value of the coupon payments and adding this to the face value.
C) taking the present value of the bond's final payment.
D) taking the sum of the present values of the future payments..
Q#18
If a bond has a face value of $1,000 and the bondholder receives coupon payments of
$35.00 semi-annually, the bond's coupon rate is:
A) 3.5%
B) 7.0%
C) 7.5%
D) Cannot be determined from the information provided.
Q#19
Which formula below best expresses the nominal interest rate, (i)?
A) i = r - Πe
B) r = i + Πe
C) i = r + Πe
D) Πe= i + r
Q#20
From the Fisher equation we see that an increase of 3% in the expected inflation rate will
cause the nominal interest rate to increase by:
A) more than 3%.
B) less than 3%.
C) 3%.
D) 6%.
Q#21
The present value of a future payment is, ceteris paribus, higher when the:
A) size of the future payment is smaller.
B) interest rate rises.
C) payment is received sooner.
Q#22
Expressed as a decimal value, 7.5% is represented as:
A) 0.75
B) 0.075
C) 0.0075
Q#23
Suppose that an initial balance of $200 is placed in an interest-bearing account for 5 years
when the interest rate equals i. Which of the following represents the value of this
balance at the close of this time period?
A) $200 + 5i
B) $200(1+5i)
C) $200(1+i)5
D) $200 / (1+i)5
Q#24
Suppose that $1,000 is deposited in an interest-bearing account for 3 years when the
annual interest rate is 5%. At the end of this three-year period, the value of the balance
will equal:
A) $863.84.
B) $1,000.00.
C) $1,050.00.
D) $1,157.62.
Q#25
Using the rule of 72, if $1,000 is deposited in an account that provides 3% annual
interest, approximately how long will it take for the balance in this account to increase to
$2,000?
A) 2 years
B) 6 years
C) 12 years
D) 24 years
Q#26
Suppose that a balance of $X is deposited in an account for 18 months. If the annual
interest rate is i, which of the following represents the value of this balance at the end of
the 18-month period?
A) $X(1+i)18
B) $X(1+i)1.5
C) c)$X(1+18i)
Q#27
If the annual interest rate is 6%, the corresponding monthly interest rate is:
A) 0.50%.
B) 0.487%.
C) 0.72%.
D) 0.072%.
Q#28
Suppose that the interest rate is initially 5.25%. If the interest rate rises by 3 basis points,
the new interest rate is:
A) 8.25%.
B) 5.55%.
C) 5.28%.
Q#29
When the interest rate is 5%, the present value of $1,000 received two years from now equals:
A) $1000.
B) $1010.
C) $952.38.
D) $907.03.
Q#30
The present value of a future payment is:
A) the same as the future value.
B) the amount that has to be given up today to receive the future value at the specified
future date.
C) always greater than the future value.
Q#31
When the interest rate rises, the price of discount bonds will:
A) fall.
B) rise.
C) remain unchanged.
D) This cannot be determined without additional information.
Q#32
The internal rate of return on an asset is:
A) always less than the market interest rate.
B) the price of the asset at which the net benefit from holding the asset is
C) the interest rate at which the present value of the q payment stream associated with the
asset equals the asset price.
Q#33
An individual should undertake an investment if:
A) the internal rate of return is less than the market interest rate.
B) the internal rate of return is greater than the market interest rate.
C) the present value of the revenue stream generated by the investment is
less than the present value of the cost of the investment.
Q#34
When the interest rate falls, holders of coupon bonds will experience a(n):
A) increase in the value of the bonds that they are already holding.
B) decrease in the value of the bonds that they are already holding.
C) unchanged value for the bonds that they are already holding.
D) unpredictable effect on the value of the bonds that they hold.
Q#35
Suppose that a discount bond provides a payment of $10,000 in 2 years. If the interest
rate is 7%, the current price of this bond will be:
A) $10,140.00.
B) $10,700.00.
C) $8734.39.
D) $8600.00.
Q#36
The real interest rate is approximately equal to:
A) nominal interest rate / price index.
B) nominal interest rate x price index.
C) nominal interest rate + the expected inflation rate.
D) nominal interest rate – the expected inflation rate.
Q#37
Which of the following statements is incorrect?
A) The real interest rate can be negative.
B) Higher nominal interest rates are usually associated with higher inflation
C) Higher real interest rates are usually associated with higher inflation rates.
D) It is easier to compute the ex post real interest rate than the ex antereal interest rate.
True and False

Q#38
If the interest rate is greater than zero, the present value of a future payment of $10,000
will always be greater than $10,000.
A) True
B) False
Q#39
An increase in the interest rate causes the present value of any given future payment to
decline.
A) True
B) False
Q#40
If a balance in an interest-bearing account grows by 5% per year, after 5 years, the
balance will be 25% larger.
A) True
B) False
Q#41
An increase in the interest rate causes the price of discount bonds to rise.
A) True
B) False
Q#42
Creditors benefit from an unexpected increase in the inflation rate.
A) True
B) False
Q#43
Which of the following is a correct statement concerning risk?
A) Risk can always be avoided at no cost.
B) Risk is a measure of uncertainty.
C) Risk is not measured relative to a benchmark.
D) Risk rarely involves a future payoff.
Q#44
All other factors held constant:
A) an investment with less risk should sell for a lower price and offer a lower return.
B) an investment with more risk should sell for a lower price and offer a higher return.
C) an investment with less risk should sell for a lower price and offer a higher return.
D) an investment with more risk should offer a lower return and sell for a higher price.
Q#45
The sum of the probabilities for all possible outcomes must equal one because:
A) each possible outcome is more likely to occur than to not occur.
B) all possible outcomes are equally likely to occur.
C) one of the possible outcomes must occur.
D) There is no way of determining the likelihood of one of the eventsoccurring, so we normalize
this likelihood by arbitrarily setting the sum of theprobabilities to 1.
Q#46
If a fair die is rolled, the probability of coming up with a one is:
A) 1/12 or 8.3 percent.
B) zero.
C) 1/6 or 16.7 percent.
Q#47
If there is a 50% probability that an investment will return $2,000 and a 50% probability
that this investment will return $1,400, the expected value of this investment is:
A) $3,400
B) $2,000
C) $1,700
D) $1,400
Q#48
An investor puts $1,000 into an investment that will return $1,300 one-half of the time
and $800 the remainder of the time. The expected return for this investor is:
A) $1,000
B) 30%
C) -20%
D) 5%
Q# 49
The variance is somewhat less useful than the standard deviation because:
A) the standard deviation is easier to calculate.
B) variance is a measure of risk, while the standard deviation is a measure of the rate of return.
C) the standard deviation is calculated in the same units as the payoffs and the variance
isn’t.
Q#50
Given a choice between two investments with the same expected payoff:
A) most people will select the one with the highest variance.
B) most people will opt for the one with the higher standard deviation.
C) most people will be indifferent since the expected payoffs are the same.
D) most people will choose the one with the lower standard deviation.
Q# 51
A risk-averse investor:
A) will always take a risk, while a risk-neutral investor will not.
B) needs more compensation for the same risk than would a riskneutralinvestor.
C) will always accept the same risk as a risk-neutral investor if the expected
returns are equal.
Q# 52
A risk-averse investor will:
A) always prefer an investment with a lower expected return.
B) always prefer an investment with a certain return to one with the same expected return
but any amount of uncertainty.
C) always require a certain return.
D) always focus exclusively on the expected return.
Q# 53
The risk premium for an investment:
A) increases with risk.
B) is a fixed amount added to the risk-free return, regardless of the amount of risk.
C) is negative for U.S. Treasury Securities.
D) is negative for risk-averse investors.
.
Q# 54
When many industries perform poorly due to a recession, this is an example of:
A) idiosyncratic risk
B) systematic risk.
C) risk premium.
D) unique risk.
Q# 55
Idiosyncratic risks are risks that are:
A) associated with using an idiosyncratic management style.
B) economy-wide risks.
C) unique to particular individuals or companies.
Q# 56
Diversification is the principle of:
A) holding more than one risk at a time.
B) reducing the risks we carry to just two.
C) creating risk to increase returns.
D) eliminating all investments from our portfolio that have idiosyncratic risk.
Q#57
If ABC Inc. and XYZ Inc. have returns that are perfectly negatively correlated:
A) adding XYZ Inc. to a portfolio that consists of only ABC Inc. will reduce risk.
B) adding ABC Inc. to a portfolio that includes only XYZ Inc. will increase risk.
C) adding XYZ Inc. to a portfolio that consists of only ABC Inc. will neither increase nor
decrease the risk of the portfolio.
D) adding XYZ Inc. to a portfolio that consists of only ABC Inc. will neither increase nor
decrease idiosyncratic risk but will lower systematic risk.
Q# 58
Spreading involves:
A) finding assets whose returns are perfectly negatively correlated.
B) building a portfolio of assets whose returns move together.
C) investing in bonds and avoiding stocks during bad times.
D) adding assets to a portfolio that move independently.
Q#59
Risk:
A) is a measure of uncertainty.
B) is a measure of the expected value of the payoff of an investment.
C) does not vary across alternative investments.
Q#60
Risk:
A) involves uncertain future outcomes.
B) is measured relative to a benchmark.
C) involves future payoffs.
Q#61
Consider a security that has a 50% probability of paying $800 and a 50% probability of
paying $1,400 next year. The expected value of next year's payoff equals:
A) $800.
B) $1,000.
C) $1,100.
D) $1,200.
Q#62
Consider a security that has a 50% probability of paying $800 and a 50% probability of
paying $1,400 next year. If the current price of this security is $1,000, the expected rate
of return on this security equals:
A) –20%.
B) 10%.
C) 20%.
D) 40%.
Q#63
Which of the following is an accurate statement concerning the use of variance and
standard deviation for a variable measured in dollars?
A) The standard deviation of the variable is measured in units of squared dollars and this is
inappropriate because dollars are rectangular, not square.
B) Both variance and standard deviation are measured in terms of dollars.
C) Standard deviation is measured in dollars, but the variance is measured in squared
dollars.
Q#64
If two risky securities provide a payoff with the same expected value in 1 year, risk is
higher for the security for which the:
A) variance is higher.
B) standard deviation is higher.
C) Both of the above are correct.
Q#65
Suppose that the variance in returns for an investment is 100. The standard deviation is:
A) 10.
B) 100.
C) 1,000.
D) 10,000.
Q#66
The probability of an event occurring:
A) is a measure of the relative frequency of the event's occurrence over repeated samples.
B) may be negative.
C) may be greater than one.
Q#67
The sum of the probabilities for all possible outcomes of an investment:
A) will always be less than 1.
B) will always be greater than 1.
C) equals 1.
D) may be greater than, less than, or equal to 1, depending on the actual probabilities of the
individual outcomes.
Q# 68
Suppose that an investment has a 50% probability of a payoff of $1,030 and a 50% probability of
a payoff of $990. Which of the following represents the variance of the payoff?
A) 20 dollars
B) 40 dollars
C) 200 dollars2
D) 400 dollars2
Q# 69
Suppose that an investment has a 50% probability of a payoff of $1,030 and a 50%
probability of a payoff of $990. Which of the following represents the standard deviation
of the payoff?
A) 20 dollars
B) 40 dollars
C) 200 dollars2
D) 400 dollars2
Q# 70
Suppose that two investments have an expected payoff of $1,200, but one has a standard
deviation of 30 while the other has a standard deviation of 40. A risk-averse individual
will prefer the investment that:
A) has a standard deviation of 40 because more is preferred to less.
B) has a standard deviation of 30 because this investment is less risky.
C) has a standard deviation of 40 because this investment is less risky.
Q#70
Value-at-risk measures:
A) the expected value of the return from an investment.
B) the maximum expected gain associated with an investment.
C) the worst possible loss that may occur over a specific time horizon, at a given
probability.
Q# 71
Given two investments with the same expected payoff in a given time horizon, a riskneutral
individual will:
A) always prefer an alternative with the lower variance in returns.
B) always prefer an alternative with the higher variance in returns.
C) be indifferent.
D) care only about the standard deviation of the payoff, not the variance.
Q# 72
An individual is risk-averse if he or she:
A) prefers a certain return to a risky return with the same expected payoff.
B) prefers a risky return to a certain return with the same expected payoff.
C) is indifferent between a certain return and a risky return with the same
expected payoff.
D) always prefers a return with a greater variance, no matter what the expected payoff.
Q# 73
If the expected value of the potential payoff is the same for two investments, the risk
premium is higher for an investment that has a _______ in payoffs.
A) lower variance
B) lower standard deviation
C) larger standard deviation
D) Both a and b are correct.
Q# 74
Risks that are unique to specific people, assets, or firms, are called:
A) systematic risks.
B) idiosyncratic risks.
C) sycophantic risks.
D) idiopathic risks.
Q# 75
Systematic risk is a form of risk that is:
A) unique to specific people, assets, or firms.
B) economy-wide.
C) sycophantic.
Q#76
Hedging reduces risk by:
A) combining assets with high standard deviations of payoffs with those with low standard
deviations of payoffs.
B) engaging in diversification by buying a mix of assets that have uncorrelated returns.
C) acquiring assets with offsetting risks.
D) increasing the variance in the payoff associated with a portfolio of investments.
Q#77
Risk spreading involves:
A) increasing the variance in outcomes.
B) reducing the variance in the returns on a portfolio through diversification.
C) trying to shift the blame for mistakes to others.
Q#78
A certain outcome has a probability equal to 1.
A) True
B) False
Q#79
Comparing two investments with the same expected value, the investment with the
largest variance in payoffs is less risky.
A) True
B) False
Q#80
Suppose that a set of investments is ranked from highest to lowest according to the variance in
payoffs. If the same set of investments is ranked from highest to lowest by the standard
deviation, the same ranking would result.
A) True
B) False
Q#81
Risk-averse individuals always prefer a risky investment to a certain investment with the
same expected payoff.
A) True
B) False
Q#82
It is generally easier to reduce idiosyncratic risk than systematic risk by risk spreading.
A) True
B) False
MCQS (Financial Institutions & Markets, Bangladesh)
Part-One
1. Question: How many commercial banks are there in Bangladesh?
1. a. 135
2. b. 144
3. c. 150
4. d. 260
5. e. None of these
Answer: e
2. Question: Which of the following Nationalized Commercial Bank of Bangladesh is

privatized firstly?
1. a. Somali Bank Ltd.

2. b. Again Bank Ltd.
3. c. Janata Bank Ltd.
4. d. Rupali Bank Ltd.
5. e. None of them
Answer: d
3. Question: Bangladesh Development Bank establish in--
1. a. 3 January 2010
2. b. 15 December 2009
3. c. 10 January 2009
4. d. 10 July 2010
5. e. None of them
Answer: a
4. Question: How many specialized banks in Bangladesh at present?
1. a. 5
2. b. 7
3. c. 4
4. d. 6
5. e. None
Answer: a
6. Question: Which of the following is not a commercial Bank?
1. a. Bangladesh Shilpa Bank

2. b. Premier Bank
3. c. Arab Bangladesh Bank
4. d. HSBC
5. e. Bank ASIA
Answer: a
7. Question: IPO stands for--
1. a. Initial Public Offering

2. b. Initial Public Order
3. c. International Policy Ordinance
4. d. Internal Policy Control
5. e. None of the above
Answer: a
8. Question: Devaluation of money results in an increase in--
1. a. Import
2. b. Export
3. c. Money supply
4. d. Profit
Answer: b
9. Question: Dhaka Bank Ltd. started to provide Islamic banking services in the year--
1. a. 2006
2. b. 2003
3. c. 2009
4. d. 1999
5. e. None of these
Answer: a
10. Question: What is the name of central Bank of Bangladesh?
1. a. National Bank of Bangladesh

2. b. The State Bank of Bangladesh
3. c. Bangladesh Bank
4. d. Monetary Authority of Bangladesh
5. e. None of these
6. Answer: c
11. Question: A 'bear market' means, that share price are--
1. a. falling
2. b. rising
3. c. going
4. d. static
5. e. None
Answer: a
12. Question: How many schedule banks in bangladesh at present?
1. a. 48
2. b. 47
3. c. 46
4. d. 49
5. e. None
Answer: a
13. Question: Other things remaining unchanged, what is likely to be a consequence of an

increase in net cash withdrawals from the commercial banks?
1. a. an inflationary spiral
2. b. an increase in the cash reserves of the commercial banks to lend
3. c. an increase in the liquidity of the commercial banks
4. d. a restriction in the ability of the commercial banks to lend
5. e. None of these
Answer: d
14. Question: What is the most abundant form of money (measured by value) in a
developed economy?
1. a. bank deposits
2. b. cash
3. c. cheques
4. d. credit card
5. e. None
Answer: a
15. Question: Money can be easily acquired and disposed of without high costs and with
relative certainty as to its value.
1. a. acceptability
2. b. durability
3. c. liquidity
4. d. purchasing power
5. e. None of these
Answer: c
16. Question: What will result in an increase in the transaction demand for money?
1. a. an increase in interest rates

2. b. an increase in the proportion of workers paid monthly, rather than weekly
3. c. a reduction in the level of real income
4. d. a reduction in the price level
5. e. None of these
Answer: b
17. Question: In a closed economy, if the income velocity of circulation of money remains
constant, what will be the result of an increase in the money supply?
1. a. a proportionate increase in the level of money income

2. b. a proportionate increase in the level of output
3. c. a proportionate increase in the rate of growth of money income
4. d. a proportionate increase in the rate of growth of output
5. e. None of these
Answer: a
18. Question: The first private sector bank in Bangladesh is--
1. a. National Bank Ltd.

2. b. Trust Bank Ltd.
3. c. Agrani Bank Ltd.
4. d. AB Bank Ltd.
Answer: d
19. Question: Which of the following is true about Dhaka Bank Ldt.?
1. a. DBL shares are traded on NYSE
2. b. DBL has 141 branches across the country
3. c. DBL has 2SME service centers
4. d. All of these are true
5. e. None of these
Answer: e
20. Question: The founder of the Grameen Bank is--
1. a. Lutfur Rahman Sarker

2. b. Professor Mohammad Yunus
3. c. Fazle Hossain Abed
4. d. Professor Muzaffar Ahmed
Answer: b
21. Question: Which of the following banks has recently been declared to be a Public Ltd.
Co.?
1. a. Rupali
2. b. Pubali
3. c. Sonali
4. d. Brac
5. e. Jamuna
Answer: c
22. Question: Dhaka Stock Exchange established in---
1. a. 28 April 1954
2. b. 29 April 1955
3. c. 28 April 1959
4. d. 26 April 1954
5. e. None of them
Answer: a
23. Question: How many foreign banks in bangladesh?
1. a. 8
2. b. 9
3. c. 6
4. d. 7
5. e. None
Answer: b
24. Question: Which organization is the regulator of the capital market?
1. a. Securities and Exchange Commission

2. b. Dhaka Stock Exchange Limeted
4. d. Ministry of finance
5. e. None of them
Answer: a
25. Question: An/a -- payment is made out of gratitude moral obligation, kindness rather
than to fulfil a legal oblization.
1. a. Ex garation
2. b. Vice-versa
3. c. Ex officio
4. d. Ex growth
Answer: a
26. Question: What is the former name of the Sonali Bank Limited?
1. a. National Bank of Pakistan

2. b. Muslim Commercial Bank Ltd.
3. c. United Bank and Union Bank
4. d. Investment Corporation of Bangladesh
5. e. None of them
Answer: a
27. Question: 'Pari Passu' means--
1. a. Reporting Promptly
2. b. Ranking equally
3. c. Ranking preferentially
4. d. Recognizing seriousness
Answer: b
28. Question: BASIC Bank Ltd. started its operation in the year--
1. a. 1993
2. b. 1987
3. c. 1989
4. d. 1967
5. e. None of these
Answer: c
29. Question: Which not of the following is not a naionalised Commercial Bank(NCB)?
1. a. Sonali Bank Ltd.

2. b. Agrani Bank Ltd.
3. c. Janata Bank Ltd.
4. d. AB Bank Ltd.
Answer: d
30. Question: In which circumstance will an increase in the public sector deficit not lead to
an increase in the money supply other things being equal?
1. a. The deficit is financed by an increase in government borrowing from private

individuals
2. b. The rate of interest is held constant
3. c. There is large-scale unemployment
4. d. Commercial bank lending to the private sector is held constant
5. e. None of these
Answer: a
31. 32. Question: 'Blue Chips' are--
1. a. Securities issued by the Government

2. b. Industrial shares considered to be a safe Investmant
3. c. Industrial shares considered to be a risky Investmant
4. d. Flat plastic counters used as money tokens
Answer: b
33. Question: In which year was Southeast Bank established?
1. a. 1996
2. b. 1987
3. c. 1978
4. d. 1995
5. e. None of these
Answer: d
34. Question: When was 'Bank of England' established?
1. a. in 1694
2. b. in 1668
3. c. in 1946
4. d. in 1945
5. e. None of these
Answer: a
35. Question: Grameen Bank is--
1. a. a commercial bank
2. b. a foreign bank
3. c. an NGO
4. d. a charitable organization
5. e. a development bank
Answer: c
36. Question: How do commercial banks create money?
1. a. by cashing cheques for their customers

2. b. by increasing their reserves at the central bank
3. c. by making loans to customers
4. d. by charging customers for banking services
5. e. None of these
Answer: c
37. Question: The oldest private foreign Bank of our country:
1. a. Standard Chartered Bank

2. b. HSBC
3. c. Citi Bank N.A
4. d. Bank of Ceylon
Answer: a
38. 39. Question: What Type of bank is the Exim Bank?
1. a. Commercial
2. b. Merchant
3. c. Central
4. d. Investment
5. e. All of these
Answer: a
40. Question: Which of the following is not the functions of central bank?
1. a. credit control
2. b. open market operation
3. c. clearing house
4. d. receiving diposit
Answer: d
41. Question: Which is an investment bank in the public sector?
1. a. BSRS
2. b. BSB
3. c. ICB
4. d. None of these
Answer: d
42. Question: When was the London Banker's clearing house, the first clearing house of the
world established?
1. a. in 1845
2. b. in 1494
3. c. in 1873
4. d. in 1835
5. e. None
Answer: a
43. Question: Southest Bank is listed in:
1. a. DSE
2. b. CSE
3. c. Both DSE & CSE
4. d. NYSE
5. e. None of these
Answer: c
44. Question: Which banks starts telephone banking in Bangladesh firstly?

1. a. Standard Chartered Bank
2. b. Janata Bank Ltd.
3. c. Jamuna Bank Ltd.
4. d. City Bank Ltd.
5. e. None of them
Answer: a
45. Question: In which year was Grameen Bank established?
1. a. 1982
2. b. 1980
3. c. 1983
4. d. 1984
5. e. None of these
Answer: c
46. Question: Which of the following is the function of commercial bank?
1. a. Acceptence of deposit
2. b. credit control
3. c. Open market operation
4. d. Issue of note
Answer: a
47. Question: Jamuna Bank Ltd. started formal operation in Bangladesh in the year--
1. a. 2001
2. b. 1996
3. c. 1982
4. d. 1990
5. e. None of these
Answer: a
48. Question: Which is the first privatized bank of Bangladesh?
1. a. National Bank Ltd.

2. b. Standard Bank Ltd.
3. c. Uttara Bank Ltd.
4. d. AB Bank Ltd.
5. e. None of them
Answer: d
49. Question: Who had earlier offered to buy out the majority shares of Rupali Bank?
1. a. Prince Bandar Bin Mohammed

2. b. Prince Waterhouse Cooper's
3. c. HSBC Bank
4. d. Citi Bank NA
5. e. George Soros
Answer: a
50. Question: Which of the following is not a local bank?
1. a. City Bank Ltd.

2. b. Standard Bank Ltd.
3. c. Habib Bank Ltd.
4. d. AB Bank Ltd.
Answer: c
51.Question: What is the name of Central bank of USA?
1. a. Reserve Bank of USA

2. b. Federal Reserve System
3. c. Reserve System of USA
4. d. The State Bank
Answer: b
52. Question: National Bank Limited starts its operation in Bangladesh?
1. a. 23 March 1983
2. b. 27 March 1986
3. c. 16 March 1985
4. d. 12 March 1984
5. e. None of them
Answer: a
53. Question: In Islamic Banking the customers are considered as -- and thus entitled to
profit sharing.
1. a. partners
2. b. employees
3. c. creditors
4. d. outsiders
5. e. None of these
Answer: a
54. Question: How many foreign commercial banks are now operating in Bangladesh?
1. a. 4
2. b. 7
3. c. 9
4. d. 8
5. e. 5
Answer: c
55. Question:Which of the following is the Specialized Bank?
1. a. Bangladesh Krishi Bank

2. b. Rajshahi Krishi Unnayon Bank
3. c. Bangladesh Development Bank
4. d. All of above
5. e. None of them
Answer: d
56. Question: Which is the regulatory monetary authority of a country?
1. a. Credit Bank
2. b. Commercial Bank
3. c. Specialised Bank
4. d. Unit Bank
5. e. Central Bank
Answer: e
57 . Question: How many nationalized commercial banks in bangladesh?
1. a. 4
2. b. 5
3. c. 6
4. d. 3
5. e. None of these
Answer: a
58. Question: According to monetarist theory, what will be the short-run effect of an
unexpected increase in the money supply?
1. a. an appreciation of the foreign exchange rate

2. b. an increase in employment
3. c. an increase in real wages
4. d. an increase in the rate of interast
5. e. None of these
Answer: b
59. 60. Question: What will be consequence of a rise in the supply of money, if the money
value of national income and the general level of prices both stay constant?
1. a. a fall in unemployment
2. b. a fall in the income velocity of circulation of money
3. c. a rise in the rate of interest
4. d. a rise in the volume of output
5. e. None of these
Answer: b
60. Question: A common form of inter-bank short-term borrowing is—
1. a. LTR
2. b. Hypo
3. c. L/C
4. d. CC
5. e. Call Money
Answer: e
61. Question: Which of the following is not the function of the central bank?
1. a. Management of foreign exchange rate

2. b. Implementation of government monetary policy
3. c. Implementation of national budget
4. d. Management of public debt
5. e. Issue of currencies
Answer: c
62. Question: Over a given period, the nominal value of national income increased by 4%.
Over the same period the money supply declined by 2%. Which of the following is correct?
1. a. National income in real terms increased by approximately 6%

2. b. National income in real terms increased by approximately 2%
3. c. The general price level increased by approximately 2%
4. d. The income velocity of circulation increased by approximately 6%
5. e. None of these
Answer: d
63. Question: What is the percentage of shareholding of the Government of Bangladesh In

BASIC Bank Ltd.?
1. a. 100%
2. b. 45%
3. c. 89%
4. d. 43%
5. e. None of these
Answer: a
64. Question: Which one is corect?
1. a. Management Integrated Customer Relation

2. b. Magnitude of Internal Capital Requirement
3. c. Magnetic Ink Character Recognition
4. d. Magnetically Identified Character Recognition
Answer: c
67. Question: What was the profit after tax for Dhaka Bank Ltd. in the year 2008?
1. a. Tk 956 million
2. b. Tk 383 million
3. c. Tk 734 million
4. d. Tk 839 million
5. e. None of these
Answer: e
68. Question: 'Tele Banking' was first introduced in Bangladesh by--
1. a. National Bank
2. b. Gringlays Bank
3. c. Standard Chartered Bank
4. d. American Express Bank
5. e. IFIC Bank
Answer: c
69. Question: How many branches does BASIC Bank Ltd. have?
1. a. 100
2. b. 200
3. c. 330
4. d. 335
5. e. None of these
Answer: e
70. Question: The proposed name of The Oriental Bank Ltd. afterits purchase by
Switzerland based ICB Financial Group Holdings AG will be--
1. a. ICB Financial Group Holdings

2. b. ICB Financial Group Holdings AG
3. c. ICB Financial Group
4. d. ICB Islamic Bank Limited
5. e. Islamic Bank Limited
Answer: d
71. Question: Which of the following must be highest?
1. a. Subscribed capital
2. b. Authorised capital
3. c. Call up capital
4. d. Paid up capital
Answer: b
72. Question: Who among the following was/is not a Governor of Bangladesh Bank?
1. a. Dr. Akbar Ali Khan

2. b. Dr. Mohammad Farashuddin
3. c. Dr. Salehuddin Ahmed
4. d. Dr. Fakhruddin Ahmed
5. e. Dr. Atiur Rahman
Answer: a
73. Question: Which of the following will be likely to result from an open market purchase
of securities by the central bank?
1. a. a fall in short-term capital inflows

2. b. a fall in the quantity of money
3. c. a rise in the level of unemployment
4. d. a rise in the rate of interest
5. e. None of these
Answer: a
74. Question: Bangladesh development Bank Ltd. a new bank in Bangladesh has been
created through merging of which of the following banks?
1. a. BKB and BSRS

2. b. BCB and BSRS
3. c. BKB and BSB
4. d. BSB and SB
Answer: b
76. Question: Which bank is sponsored by the Army Welfare Trust(AWT) in Bangladesh?
1. a. The Premier Bank Ltd.

2. b. Trust Bank Ltd.
3. c. Mutual Trust Bank Ltd.
4. d. AB Bank Ltd.
Answer: b
77. Question: BRAC Bank Ltd. is a--
1. a. Nationalised Commercial Bank

2. b. Private Sector Bank
3. c. Non Banking Financial Institute
4. d. NGO
Answer: b
78. Question: Open market operation is used to control--
1. a. Import
2. b. Export
3. c. Labour supply
4. d. Money supply
Answer: d
79. Question: How many domestic banks in bangladesh at present?
1. a. 37
2. b. 38
3. c. 39
4. d. 41
5. e. None
Answer: a
80. Question: The headquarter of Asian Development Bank is situated in which country?
1. a. Saudi Arabia
2. b. Pakistan
3. c. Philippines
4. d. Thailand
5. e. None of them
Answer: c
81. Question: The recent regulatory change in banking sector of Bangladesh is--
1. a. Increase lending rate

2. b. Increase deposit rate
3. c. Decrease lending rate
4. d. Decrease deposit rate
5. e. Increase spread
Answer: c
82. Question: Which one of the following is not a central Bank?
1. a. Bangladesh Bank
2. b. State Bank of Pakistan
3. c. State Bank of India
4. d. Bank of Japan
Answer: c
83. Question: Dr. Atiur Rahman is the --- governor of Bangladesh Bank?
1. a. 7th
2. b. 8th
3. c. 9th
4. d. 10th
5. e. None of these
Answer: d
84. Question: The Central Bank of UK is--
1. a. Reserve Bank of England

2. b. Central Bank of England
3. c. Federal Bank of England
4. d. Federal Bank of UK
5. e. None of these
85. Question: The central bank in England is known as--
1. a. United Kingdom Bank

2. b. Royal Bank of England
3. c. Bank of England
4. d. Chartered Bank of England
Answer: c
86. Question: Which is the last lending source of other Bank or institutions?
2. b. Janata Bank
3. c. Sonali Bank Ltd.
4. d. Krishi Bank
5. e. None of them
Answer: a
87. Question: Former Name of the Bangladesh Bank--
1. a. State Bank of Pakisthan

2. b. State Bank of East Pakistan
3. c. Central Bank of Bangladesh
4. d. Bank of Bangladesh
5. e. None of them
Answer: a
88. Question: How many members in Board of director of Bangladesh Bank?
1. a. 9
2. b. 11
3. c. 10
4. d. 8
5. e. None
Answer: a
89. Question: How many branches of Bangladesh Bank?
1. a. 9
2. b. 8
3. c. 11
4. d. 10
5. e. None
Answer: d
90. Question: Which percent of cash reserve has to reserve in Bangladesh Bank?
1. a. 5%
2. b. 2.5%
3. c. 2%
4. d. 3%
5. e. None
Answer: a
91. Question: Which is the first Organized central bank of the world?
1. a. The Bank of England

2. b. The Bank of Italy
3. c. The Bank of Sweden
4. d. Mitgamar Bank, Egypt
5. e. None of these
Answer: a
92. Question: Which of the following is the function of the central bank?
1. a. deposit collection
2. b. savings mobilization
3. c. loan sanction
4. d. credit control
5. e. capital formation
Answer: d
93. Question: The first certified central bank of the world is--
1. a. The Bank of England

2. b. The Bank of Italy
3. c. The Bank of Sweden
4. d. The Bank of Venice
5. e. None of them
Answer: a
94. Question: Which is the Bank of government of the Bangladesh?
2. b. Bangladesh development Bank
4. d. Krishi Bank
5. e. None of them
Answer: a
95. Question: What is the name of central Bank of China?
1. a. National Bank of China

2. b. Bank of China
3. c. State Bank of China
4. d. People's Bank of China
5. e. None of them
Answer: d
96. Question: How much foreign corrency haas to reserve Bangladesh Bank to issue new
note or currency?
1. a. 30%
2. b. 25%
3. c. 20%
4. d. 15%
5. e. None
Answer: a
97. Question: Which is not a objective of a Bangladesh Bank?
1. a. To regulate currency issues

2. b. To manage the monetary and credit system of Bangladesh
3. c. To preserve the par value of the Bangladesh Taka
4. d. To collect deposit from general public
5. e. None of these
Answer: d
96. Question: Which correncies are called to the ordered money?
1. a. Note of 1 Taka and 5 Taka

2. b. Note of 1 Taka and 2 Taka
3. c. Note of 2 Taka and 10 Taka
4. d. Note of 50 Taka and 100 Taka
5. e. None of these
Answer: b
99. Question: The headquarter of Islamic Development Bank is in---
1. a. Cairo
2. b. Dubai
3. c. Rabat
4. d. Jeddah
5. e. None of these
Answer: d
100. Question: The present governor of Bangladesh Bank is--
1. a. Dr. Salehuddin Ahmed

2. b. Mr. Sirajuddin Ahmed Chowdhury
3. c. Dr. Mohammad Tareque
4. d. Dr. Atiur Rahman
5. e. Dr. Fakhruddin Ahmed
Answer: d
Part-Two
1. Question: In which of the following countries the business of banking started first?
1. a. England
2. b. Italy
3. c. Germany
4. d. France
Answer: b
2. 103. Question: Architect of the Bangladesh Bank Bhabon (27th floor)?
1. a. Shafiul Kader
2. b. F.R. Khan
3. c. Saiful Kader
4. d. Musharraf Hossain
5. e. None of them
Answer: a
3. Question: Bangladesh Bank started functioning--
1. a. 16 December 1971
2. b. 16 December 1972
3. c. 26 March 1971
4. d. 25 December 1971
5. e. None of these
Answer: a
4. Question: Which of the following is not a funtion of the Central Bank?
1. a. To help manage the exchange rate when necessary

2. b. Implementing government's monetary policy
3. c. Preparation and Implementation of national budget.
4. d. Management of public debt.
5. e. None of these
Answer: c
5. Question: What is the maximum lending rate to be offered to industrial borrowers as
was directed by the central bank of Bangladesh recently?
1. a. 12%
2. b. 13%
3. c. 14%
4. d. 15%
5. e. None of these
Answer: b
6. Question: Which organization or agency is directly responsible for controlling money

supply in Bangladesh?
1. a. Ministry of Finance
2. b. Sonali Bank
4. d. Ministry of Planning
5. e. None of these
Answer: c
7. Question: The previous name of Bangladesh Bank was.
1. a. State Bank of Pakisthan

2. b. Reserve Bank of Pakisthan
3. c. National Bank of Pakisthan
4. d. Federal Bank of Pakisthan
5. e. Bank of Pakisthan
Answer: a
8. Question: Head office of the 'Bank of the South' is in--
1. a. South Africa
2. b. India
3. c. USA
4. d. Venezuela
Answer: d
9. Question: The central bank in the USA is known as
1. a. US Bank
2. b. Federal Reserve System
3. c. Key Bank USA
4. d. Bank of America
Answer: b
10. Question: Which bank does not earn profit?
2. b. Central Bank
3. c. Grameen Bank
4. d. Krishi Bank
5. e. None of them
Answer: a
11. Question: In Which place is not the branch of Bangladesh Bank?
1. a. Bogra
2. b. Barisal
3. c. Comilla
4. d. Sylhet
5. e. None of them
Answer: c
12. Question: Name of central Bank of Morocco--
1. a. National Bank of Morocco

2. b. Bank of Markesy
3. c. Bank Al-Maghrib
4. d. Central Bank of Morocco
5. e. None of them
Answer: c
13. Question: Which of the following institutions is the Guardian of Money market in
Bangladesh?
1. a. SEC
2. b. DSE
4. d. CDBL
5. e. Bangladesh Bank
Answer: e
14. Question: The name of the first central bank of the world is--
1. a. Sanshi Bank
2. b. Bank of England
3. c. Bank of Venice
4. d. Bank of France
5. e. None of these
Answer: b
15. Question: Treasury Bills are issued--
1. a. At discount
2. b. At premium
3. c. At Per Value
4. d. With Coupon
5. e. With Maturity more than 5 years
Answer: a
16. Question: IFC is a(n)
1. a. Multilateral trade organization

2. b. International association of finance companies
3. c. Bi-lateral trade organization
4. d. Investment bank for Asia Pacific
5. e. Private sector development wing of the World Bank
Answer: e
17. Question: Which one of the following is not a depositary financial institution?
1. a. IFIC Bank Limited

2. b. The Oriental Bank Limited
3. c. Agrani Bank
4. d. Uttara Bank Limited
5. e. Investment Corporation of Bangladesh
Answer: e
18. Question: IBRD is the name of the--
1. a. IMF
2. b. World Bank
3. c. ADB
4. d. IDB
5. e. UNDP
Answer: b
19. Question: SEC stands for--
1. a. Securities Exchange Commission

2. b. Social Enrollment Committee
3. c. Survival Environment Call
4. d. Social Equality Cell
5. e. None of these
Answer: a
20. Question: What is the present bank rate in Bangladesh?
1. a. 7.5%
2. b. 6%
3. c. 8%
4. d. 10%
5. e. 5%
Answer: e
21. Question: Stock exchanges of Bangladesh operate under the direct control of--
2. b. Dhaka Chamber of Commerce and Industry
3. c. Ministry of Commerce
4. d. Security Exchange Commission
5. e. None of these
Answer: d
23. Question: What is meant by total money supply of a country?
1. a. Money in the hand of people

2. b. Demand deposit of bank
3. c. Term deposit
4. d. a + b + c
5. e. None of these
Answer: d
24. Question: Which notes are called to the Bangladesh Bank notes?
1. a. Note of 5 Taka to 1000 Taka
2. b. Note of 1 Taka and 2 Taka
3. c. Note of 10 Taka to 1000 Taka
4. d. Note of 5 Taka to 500 Taka
5. e. None of these
Answer: a
25. Question: Intermediaries, who are agents of investors and match buyers with sellers of
securities are called--
1. a. Brokers
2. b. Investment bankers
3. c. Dealers
4. d. Treders
5. e. Negotiators
Answer: a
26. Question: The duration of a valid cheque is:
1. a. 6 months
2. b. 15 days
3. c. 1 year
4. d. 2 months
5. e. 3 months
Answer: a
27. Question: BO in BO Account stands for--
1. a. Beneficiary Owner's
2. b. Bonafide Operator
3. c. Benefit Operation
4. d. By Owner's
5. e. None of these
Answer: a
28. Question: If nominal interest rate is 10% and inflation rate is 4% what is the real
interest rate?
1. a. 14%
2. b. 6%
3. c. 40%
4. d. 2.5%
5. e. 5%
Answer: b
29. Question: The central regulatory body for the banks in Bangladesh is:
1. a. Ministry of Commerce
2. b. SEC
3. c. BIBM
4. d. Bangladesh Bank
5. e. None of these
Answer: d
30. Question: IMF is a(n)--
1. a. Multinational Bank
2. b. National Bank
3. c. International Financial Institution
4. d. UN Body
5. e. None of these
Answer: c
31. Question: DSE operates under the direct control of--
2. b. FBCCI
3. c. SEC
Answer: c
32. Question: The name of President of the World Bank is:
1. a. Robert Zoellick
2. b. P. Robins
3. c. Al-Gore
4. d. Franklin
5. e. Robert McNamara
Answer: a
33. Question: The act adopted for prevention of use and transfer of money illegally is called
—
1. a. Illegal Money Transfer Act

2. b. Money Laundering Prevention Act
3. c. Improper Money Use and Transfer Act
4. d. Money Laundering Act
5. e. Money Use and Transfer Act
Answer: d
34. Question: The difference between a bank’s rate of interest on lending to its prime
customers and the rate of interest that it pays to others on borrowings (demand, time or
savings deposits) is called—
1. a. Profit rate
2. b. Margin rate
3. c. Income rate
4. d. Interest spread
5. e. Balance
Answer: d
35. Question: A Bank's function do not include--
1. a. acceptance of deposit
2. b. manufacturing
3. c. giving loans
4. d. transfer of funds
5. e. None of these
Answer: b
36. Question: Bank rate means--
1. a. Interest rate at which Bangladesh Bank lend money to other Banks

2. b. Interest rate at which Banks gets money from other Banks
3. c. Rate of interest that Banks charge on their credit
4. d. Interest rate that is offered by banks to collect deposits
5. e. None of these
Answer: a
37. Question: Which of the following issues is included in the revenue policy?
1. a. Money supply
2. b. Export-Import
3. c. Tax and subsidy
4. d. Poverty alleviation
5. e. None of them
Answer: c
38. Question: The world bank is a--
1. a. Multinational Bank
2. b. National Bank
3. c. U. N. Body
4. d. International Financial Institution
5. e. None of these
Answer: d
39. Question: Treasury Bills are sold by--
2. b. SEC
3. c. Households
4. d. Jamuna Bank
5. e. None of these
Answer: a
40. Question: Which of the following deposit accounts provides the lowest interest?
1. a. Fixed deposit
2. b. Savings deposit
3. c. Current deposit
4. d. STD account
5. e. Time deposit
Answer: c
41. Question: Apart from DSE, which is the other stock Exchange of Bangladesh?
1. a. Sylhet Stock Exchange

2. b. Karnaphuli Stock Exchange
3. c. Chittagong Stock Exchange
4. d. Khulna Stock Exchange
5. e. None of these
Answer: c
42. Question: Where is the headquarters of the world bank group located?
1. a. Washington DC
2. b. Zurich
3. c. London
4. d. Oslo
5. e. Cairo
Answer: a
43. Question: Finance companies--
1. a. borrow in large amounts, but lend in small amounts

2. b. are highly regulated
3. c. are capital market intermediaries
4. d. usually charge very low interest rates
5. e. are members of Dhaka Stock Exchange
Answer: c
44. Question: In which year did Bangladesh become a member of the IMF?
1. a. 1993
2. b. 1972
3. c. 1974
4. d. 1977
5. e. 1980
Answer: b
45. Question: Who is the current governor of Bangladesh Bank?
1. a. Dr. Salehuddin Ahmed

2. b. Dr. Farashuddin
3. c. Dr. Fakhruddin Ahmed
4. d. Dr. Atiur Rahman
5. e. None of them
Answer: d
46. Question: The MFA that regulated world trade in textile and clothing phased out in--
1. a. Dec 2004
2. b. June 2004
3. c. June 2005
4. d. Jan 2005
5. e. June 2000
Answer: a
47. Question: When was Asian Development Bank established?
1. a. 1948
2. b. 1950
3. c. 1966
4. d. 1970
5. e. None
Answer: c
48. Question: The term 'Book Building Method' is related to--
1. a. Building construction
2. b. Price discovery method of IPO
3. c. Ship building
4. d. Printing and Publication
Answer: b
49. Question: Which wing of the World Bank is called 'soft-loan-window'?
1. a. IBRD
2. b. IDA
3. c. IFC
4. d. FDI
5. e. BIS
Answer: b
50. Question: Which one of the following is a specialized financial institution?
1. a. Islamic bank Bangladesh Ltd.

2. b. Rajshahi Krishi Unnayan Bank
3. c. Bangladesh commerce Bank Ltd.
4. d. Mutual Trust Bank Ltd.
5. e. None of these
Answer: b
51. Question: The currency museum of Bangladesh was established in the year--
1. a. 2009
2. b. 2005
3. c. 1987
4. d. 1997
5. e. None of these
Answer: a
52. Question: Business of banking started first in which of the following country?
1. a. England
2. b. Italy
3. c. Germany
4. d. France
Answer:
53. Question: The first NCB to register in the stock market is--
1. a. ICB
2. b. Janata Bank
3. c. BASIC Bank
4. d. Rupali Bank
5. e. Sonali Bank
Answer: d
Question: Annual inflation rate of four or more than four digits is called--
1. a. Low inflation
2. b. Galloping inflation
3. c. Hyper inflation
4. d. Cost-pull inflation
Answer: c
54. Question: Owner's share of profit of a public limited company is called--
1. a. Dividend
2. b. Directors remuneration
3. c. MD's salary
4. d. Employee wages
Answer: a
55. Question: Which of the following is not traded in the stock exchanges of Bangladesh?
1. a. Government Bond
2. b. Preferred Stock
3. c. Common Stock
4. d. Corporate Bond
5. e. Option
Answer: e
56. Question: When you deposit money in a bank, you are--
1. a. taking credit from it

2. b. earning money
3. c. lending it money
4. d. creating money
5. e. None of these
Answer: c
57. Question: What is the current Statutory Liquidity Reserve(SLR) requirement of

commercial banks with Bangladesh Bank?
1. a. 13%
2. b. 18%
3. c. 20%
4. d. 22%
5. e. 25%
Answer: b
58. Question: Insurance is a system of--
1. a. Welcoming risk
2. b. Avoiding risk
3. c. Spreading risk
4. d. Developing risk
5. e. None of these
Answer: c
59. Question: Inflation that results from only the increase in demand of commodities is
called--
1. a. Cost-pull inflation
2. b. Deflation
3. c. Devaluation
4. d. Demand-pull inflation
5. e. None of these
Answer: d
60. Question: Which of the following is the major stock market index in England?
1. a. NASDAQ
2. b. DAX
3. c. FTSE
4. d. NIKKIE
5. e. S&P 500
Answer: c
61. Question: The exchange rate of British Pound against Taka is close to:
1. a. 65
2. b. 85
3. c. 100
4. d. 120
5. e. None of these
Answer: d
62. Question: Which of the following is the main objective of IMF?
1. a. to lend developing countries

2. b. to promote private sector in underdevoloped nations
3. c. to proomote international trade among countries
4. d. to assist countries stabilize currrency values
5. e. to promot cooperation among poor countries
Answer: c
63. Question: Where is the ADB headquarters located?
1. a. Thimpu
2. b. Manila
3. c. New Delhi
4. d. Bangkok
Answer: b
64. Question: What is the name of the company in power sector that was listed with the
stock exchange in June 2006?
1. a. Power Grid Company of Bangladesh

2. b. DESA
3. c. Summit Power company
4. d. DESCO
5. e. Rural Power Company
Answer: d
65. Question: Annual inflation rate of two or three digit is called--
1. a. Low inflation
4. d. Demand-pull inflation
5. e. None of these
Answer: b
66. Question: What does IMF stand for?
1. a. International Maritime Federation

2. b. Intravenous Micro Fluid
3. c. International Monetary Found
4. d. International Marketing Forum
5. e. None of these
Answer: c
67. Question: Money mainly serves as a
1. a. medium of exchange
2. b. means of barter
3. c. means of hoarding
4. d. both (a) & (b)
5. e. None of these
Answer: d
68. Question: Sadharan Bima Corporation has a market share of over -- % of the total
premium income of the insurence market of Bangladesh.
1. a. 20
2. b. 30
3. c. 40
4. d. 50
5. e. None of these
Answer: a
69. Question: Money market is a--

1. a. market for short term fund
2. b. market for long term fund
3. c. market for risky securities
4. d. market for hedge fund
5. e. market for risk free assets
Answer: a
70. Question: The exchange rate of British Pound against Taka is close to--
1. a. 65
2. b. 85
3. c. 120
4. d. 140
5. e. None of these
Answer: e
71. Question: The maximum lending rate for the commercial banks to tackle the fallout of
global recession. Which sector has been kept outside this regulation?
1. a. Agriculture Loan
2. b. Industrial Loan
3. c. Credit Card and Customer Loan
4. d. Transport Loan
Answer: c
72. Question: Which of the following is not an instrument--
1. a. Treasury Bill
2. b. Fixed Deposit
3. c. Wage Earners Bond
4. d. Defense Saving Certificate
5. e. None of these
Answer: b
73. Question: Life insurance companies mainly provide benefits to the beneficiary of a
policy upon?
1. a. Policyholder's retirement
2. b. Policyholder's illness
3. c. Policyholder's death
4. d. All of these
5. e. None of these
Answer: c
74. Question: Who regulates the Indian Stock Market?
1. a. State Bank of India

2. b. Security and Exchange Board of India
3. c. Security Exchange Commission of India
4. d. Indian Security Exchange Commission
Answer: b
75. Question: Which of the following issues is included in the monetary policy?
1. a. Duty
2. b. Export-Import
3. c. Tax and subsidy
4. d. Credit control
5. e. None of these
Answer: d
76. Question: The bank rate means---
1. a. The rate at which commercial banks lend money

2. b. The rate at which central banks lends money to commercial bank
3. c. The rate at which interest on deposite is fixed
4. d. The rate at which commercial banks lend to others commercial banks
5. e. None of these
Answer: b
77. Question: What does BIA stand for?
1. a. Bangladesh Insurance Association

2. b. Bank for international Assistance
3. c. Bangladesh Insurance Authority
4. d. Board of Investment Act
5. e. Bangladesh Insurance Academy
Answer: e
78. Question: How many Stock Exchanges are there in Bangladesh?
1. a. Three
2. b. Two
3. c. One
4. d. Four
5. e. None of these
Answer: b
79. Question: Taka 10 polymer note was first introduced in Bangladesh in--
1. a. 2000
2. b. 2001
3. c. 1999
4. d. 2002
5. e. 2003
Answer: a
80. Question: Inflation meant by what type of increase?
1. a. Real GDP
2. b. Rate of unemployment
3. c. Price level
4. d. Standard of living
Answer: c
81. Question: Which of the following is not a function of a commercial bank?
1. a. Deposit mobilization
2. b. Credit control
3. c. Providing credit
4. d. Discounting bills
5. e. Providing agency service
Answer: b
82. Question: Which of the following is known as 'Twin of Bertton Woods'?
1. a. IMF, IDA
2. b. IMF, IBRD
3. c. ILO, IDA
4. d. ILO, IBRD
Answer: b
83. Question: In Bangladesh, the companies Act was amended in:
1. a. 1913
2. b. 1986
3. c. 1992
4. d. 1995
5. e. 1994
Answer: e
84. Question: Who was the founder of BARD at Comilla?
1. a. Abdul Hamid Khan Bhasani

2. b. Akhter Hamid Khan
3. c. Dr. Md Younus
4. d. Hamidul Hoque Chowdhury
5. e. Zafrullah Choudhury
Answer: b
85. Question: Stock dividend is distributed among:
1. a. preference shareholders
2. b. debenture holders
3. c. common shareholders
4. d. directors
5. e. executives
Answer: c
86. Question: Share market of the country is regulated by:
1. a. Securities & Exchange Commission

2. b. Investment Corporation of Bangladesh
3. c. Dhaka Stock Exchange
4. d. Ministry of finance
5. e. Bangladesh Bank
Answer: a
87. Question: DES (Dhaka Stock Exchange) operates under the direct control of--
2. b. FBCCI
3. c. SEC
5. e. None of these
Answer: c
88. Question: Too much money chasing too few goods - is a definition of what?
1. a. Inflation
2. b. Deflation
3. c. Finance
4. d. Demand of money
5. e. None of them
Answer: a
89. Question: The term secondary market is used in--
1. a. Labour Market
2. b. Job Market
3. c. Agriculture Market
4. d. Stock Market
Answer: d
90. Question: How many development banks are there in Bangladesh for the development
of agriculture sector?
1. a. 1
2. b. 2
3. c. 5
4. d. 10
5. e. 24
Answer: b
91. Question: Govt. Fiscal policy relates to:
1. a. Tax
2. b. Money supply
3. c. Export-Import
4. d. Financial Institution
Answer: a
92. Question: Annual inflation rate of one digit is called--

1. a. Low inflation
4. d. Cost-pull inflation
Answer: a
93. Question: Private General insurance companies in Bangladesh must place 50% of their
re-insurance business with which of the following companies?
1. a. Jibon Bima Corporation

2. b. ALICO
3. c. Sadharon Bima Corporation
4. d. Directorate of Insurance
5. e. None of these
Answer: c
94. Question: Floating exchange rate means conversion rate between Dollar and Taka will
be determined by--
1. a. Market
2. b. Bangladesh Bank
3. c. Ministry of Finance
4. d. None of these
Answer: a
96. Question: Which type of account gives lowest rate of return?
1. a. Savings account
2. b. Fixed deposits
3. c. Current account
4. d. Joint account
5. e. None of these
Answer: c
97. Question: Which of the following institution is the pioneer of microfinance movement in
Bangladesh?
1. a. BRAC
2. b. ASA
3. c. Grameen Bank
4. d. Proshika
5. e. TMSS
Answer: c
99. Question: When was International Moneytary Fund(IMF) established?
1. a. 1942
2. b. 1950
3. c. 1945
4. d. 1948
5. e. None of these
Answer: c
100. Question: Which market deals in short-term credit?
1. a. Free market
2. b. Money market
3. c. Monopoly market
4. d. Capital market
5. e. None of these
Answer: b
Part-Three- MCQs
1. Question: We open accounts with a commercial bank for propose of--
1. a. Earning interest
2. b. Safe custody of funds
3. c. Getting Loan
4. d. All of these
Answer: d
2. Question: Call money rate means--
1. a. Interbank short term borrowing rate

2. b. The loan rate issued during the Eid
3. c. Long term borrowing rate by banks
4. d. Credit rate without guarantee
5. e. None of these
Answer: a
3. Question: An increase in the growth rate of the money supply is most likely to be
followed by:
1. a. Recession
2. b. a decline in economic activity
3. c. Inflation
4. d. All of these
5. e. None of these
Answer: c
4. Question: East Pakistan Stock Exchange Association Ltd. Previous name of Dhaka Stock
Exchange, was incorporated in the year.
1. a. 1952
2. b. 1953
3. c. 1954
4. d. 1964
5. e. none of these
Answer: c
5. Question: To allow insurance companies in private sector, 'The Insurence Corporation

Act 1973' was amended in the year in the year--
1. a. 1982
2. b. 1983
3. c. 1984
4. d. 1985
5. e. None of these
Answer: c
6. Question: Which one is the equation of money supply?
1. a. DD = MS + CU + TD
2. b. CU = DD + MS - TD
3. c. MS = CU + DD + TD
4. d. a + b + c
5. e. None of these
Answer: c
7. Question: When Company offers its share to public for the first time, it is known as--
1. a. Initial Public Offering

2. b. Secondary Stock Offering
3. c. Right Issue
4. d. Bonus Issue
5. e. New Issue
Answer: a
8. Question: Who has offered to buy out the majority shares of Rupali Bank?
1. a. Prince Badar Bin Mohammed

2. b. Prince Waterhouse Cooper's
3. c. HSBC Bank
4. d. Citi Bank NA
5. e. George Soros
Answer: a
9. Question: Who issues One Taka and Two Taka note?
1. a. Commercial bank
2. b. Central Bank
3. c. Government
4. d. Specialised bank
5. e. None of these
Answer: c
10. Question: Which classes of people are benefited from inflation?
1. a. Creditor
2. b. Debtor
3. c. Workers
4. d. Customer
Answer: b
11. Question: Which of the following is the largest NGO in the world?
1. a. TMSS
2. b. ASA
3. c. Proshika
4. d. PKSF
5. e. None of these
12. Answer: eQuestion: NBFI stands for--
1. a. Non Brokering Financial Institution

2. b. Non Bailing Financial Institution
3. c. Nationalized Banking and Financial Institution
4. d. Non Bank Financial Institution
5. e. National Banking and Financial Institution
Answer: d
13. Question: Which one of the following is not the function of Bangladesh Bank?
1. a. Monetary Control
2. b. Money Circulation
3. c. Deposit Collection
4. d. Currency Issues
5. e. None of these
Answer: c
14. Question: 'The Federal Reserve System' is the central Bank of--
1. a. The USA
2. b. The UK
3. c. Russia
4. d. India
5. e. None of these
Answer: a
15. Question: ------ insurance is the oldest form of insurance that was introduced in the
12th/13th century in the northern part of Italy.
1. a. Marine
2. b. Fire
3. c. Burglary
4. d. Motor
5. e. None of these
Answer: a
16. Question: Which of the following is the soft loan window of the World Bank(WB)?
1. a. IFC
2. b. IBRD
3. c. MIGA
4. d. IDA
Answer: d
17. Question: The insurance policy that covers risk of robbery or theft for cash on Counter
which may also be provided for Stamps securities, money orders, postal orders etc is
called--
1. a. Cash on Transit Insurance Policy

2. b. Cash on Counter Insurance Policy
3. c. Cash in Safe Insurance Policy
4. d. All of these
5. e. None of these
Answer: d
18. Question: Which type of bank account does not pay interest to the depositors?
1. a. Current account
2. b. Savings account
3. c. Fixed deposit account
4. d. Short-term deposit account
5. e. None of these
Answer: a
19. Question: The policy by which government determines revenue expenditure, tax and
subsidy is called--
1. a. Monetary policy
2. b. Revenue policy
3. c. Commercial policy
4. d. Industrial policy
5. e. None of them
Answer: b
20. Question: Who issues Five Taka and Ten Taka note?
a. Commercial bank
b. Central Bank
c. Government
d. Specialised bank
e. None of the above
Answer: b
21. Question: The system of exchanging one commodity for another commodity is called--
1. a. Merket system
2. b. Barter system
3. c. Invisible sector
4. d. Value system
5. e. None of these
Answer: b
22. Question: Dhaka Stock Exchange was established in---
1. a. 1950
2. b. 1952
3. c. 1954
4. d. 1958
5. e. 1960
Answer: c
23. Question: Circuit breaker in a stock exchange works as--

1. a. A medium to spilt stocks
2. b. An obstacle to excessive change in share price
3. c. A policy for broker houses
4. d. A constraint to issue bonus shares
5. e. None of these
Answer: b
24. Question: Which of the following insurence produtcs is not offered by Sadharan Bima
Corporation?
1. a. Health
2. b. Marine Cargo
3. c. Burglary
4. d. Aviation
5. e. None of these
Answer: a
25. Question: Which of the following is a monetary policy instrument?
1. a. Open Market Operation

2. b. Tax
3. c. Savings
4. d. Investments
5. e. Fiscal deficit
Answer: a
26. Question: Which authoritative body regulates the stock markets of our country?
2. b. Ministry of Finance
3. c. Securities & Exchange Commission
4. d. Ministry of Commerce
Answer: c
27. Question: Which of the following account (s) can the customers open with Dhaka
Bank's Islamic Banking Branches?
1. a. Mudaraba Term Deposit Account

2. b. Mudaraba Special Notice Account
3. c. Mudaraba Hajj Savings Account
4. d. All of these
5. e. None of these
Answer: d
28. Question: In which year did the government of Bangladesh nationalized the insurence
industry?
1. a. 1972
2. b. 1973
3. c. 1974
4. d. 1975
5. e. None of these
Answer: a
29. Question: The rate that banks charge to their most creditworthy customers is generally
termed as:
1. a. Bank rate
2. b. Prime rate
3. c. Interest rate
4. d. Discount rate
Answer: c
30. Question: The current inflation rate of Bangladesh is close to which of the following?
1. a. 5%
2. b. 6%
3. c. 7%
4. d. 8%
5. e. None of these
Answer: d
31. Question: The theory that bad money drives good money out of circulation is given by:
1. a. Marshall
2. b. Keynes
3. c. Robertson
4. d. Amartya Sen
5. e. Garsham
Answer: e
32. Question: We open current accounts with a commercial bank for a propose of--
1. a. Earning interest
2. b. Safe custody of funds
3. c. Getting Loan
4. d. All of these
5. e. None of these
Answer: b
33. Question: Money appears to have a major influence on:
1. a. inflation
2. b. the business cycle
3. c. interest rates
4. d. all of these
5. e. None of these
Answer: d
34. Question: The disadvantage of dividing one commodity into pieces in barter system is
called--
1. a. Incongruence of want
2. b. Want of unit of value measurement
3. c. Indivisibility
4. d. Disadvantage of transfer
5. e. None of these
Answer: c
35. Question: The 4th Asia-Pacific Microcredit Summit was held in which city?
1. a. Tokyo
2. b. Beijing
3. c. Manila
4. d. Dhaka
Answer: d
36. Question: The net increase in owner's equity resulting from business operations is
called--
1. a. expense
2. b. earnings per share
3. c. net income
4. d. revenue
5. e. retained earnings
Answer: e
37. Question: Which of the following insurance products was discontinued by Sadharan
Bima Corporation in the 90's?
1. a. Burglary
2. b. Marine Cargo
3. c. Fidelity
4. d. Crop
5. e. None of these
Answer: d
38. Question: The Head Office of Asian Development Bank(ADB) is situated in--
1. a. Bangkok
2. b. Manila
3. c. Dhaka
4. d. Tokyo
5. e. Delhi
Answer: b
39. Question: What is Bangladesh Development Bank?
1. a. New name for Bangladesh Shilpa Bank

2. b. A Bank established by SAARC
3. c. Bangladesh branch of the ADB
4. d. A merger of development finance institutions
5. e. A new private bank
Answer: d
40. Question: Which of the following is not an instrument for Government borrowing?
1. a. Treasury Bill
2. b. Fixed Deposit
3. c. Wage Earners Bond
Answer: b
41. Question: When did Bangladesh become member of Asian Development Bank?
1. a. 1975
2. b. 1977
3. c. 1972
4. d. 1973
5. e. None
Answer: d
42. Question: Which of the following is not a source of long term finance?
1. a. Bond
2. b. Preferred Stock
3. c. Common Stock
4. d. Commarcial Paper
5. e. Term Loan
Answer: d
43. Question: Which is the main source of bank fund?
1. a. paid-up capital
2. b. reserve fund
3. c. borrowing from the central bank
4. d. deposits
5. e. repaid principal and interest
Answer: d
44. Question: Which one is not a national currency---
1. a. Euro
2. b. Dollar
3. c. Sterling
4. d. Guilder
Answer: a
45. Question: Which is not an instrument of Government borrowing?
1. a. Treasury Bill
2. b. Fixed Deposit
3. c. Wage Eanres Bond
Answer: b
46. Question: Private Insurance Companies started operating in the Bangladesh Insurance
Market from--
1. a. 1984
2. b. 1985
3. c. 1986
4. d. 1987
5. e. None of these
Answer: b
47. Question: Specialized firm that finances young, startup companies are called--
1. a. venture capital firm

2. b. finance companies
3. c. SME finance companies
4. d. capital creation companies
5. e. investment bankers
Answer: a
48.Question: What do you understand by the term 'Call Money'?
1. a. Inter-bank short-term lending and borrowing

2. b. Borrowing from central bank
3. c. Lending by commercial banks to insurance companies
4. d. Lending by leasing companies to industrial sector
5. e. None of these
Answer: a
49. Question: Wall Street in New York is famous for what?
1. a. World's largest financial center

2. b. World's largest stock market
3. c. World's largest tourist center
4. d. World's largest trade center
5. e. None of these
Answer: b
50. Question: Which organization or agency issuses Two Taka note in Bangladesh?
2. b. Ministry of Finance
3. c. Ministry of Commerce
4. d. Sonali Bank
Answer: b
52. Question: Which of the following is the main source of revenue for the insurance
companies in Bangladesh?
1. a. Premium
2. b. Investment Income
3. c. Share trading
4. d. Deposit collection
5. e. None of these
Answer: a
53. Question: What happens when money supply increases?
1. a. Inflation
2. b. Deflation
3. c. Reduction is price of commodity
4. d. Increase in unemployment
5. e. None of them
Answer:
54. Question: Where is the Headquarter of Asian Development Bank located?
1. a. Tokyo
2. b. Hong Kong
3. c. Manila
4. d. Kowalalampur
5. e. None of these
Answer: c
55. Question: Which of the following insurance products covers the exporters against losses
resulting from both commercial and non-commercial (political) risks in respect of goods
sold to foreign buyers on credit?
1. a. Export Credit Guarantee Scheme

2. b. All risk insurance Policy
3. c. Export Import Policy
4. d. All of these
5. e. None of these
Answer: a
56. Question: Beta shows the --- of a stock.
1. a. total risk
2. b. systemic risk
3. c. idiosyncratic risk
4. d. credit risk
5. e. unique risk
Answer: b
57. Question: When was world bank established?
1. a. 1950
2. b. 1947
3. c. 1941
4. d. 1944
5. e. None
Answer: b
58. Question: Inflation that results from the increase in production cost is called--
1. a. Demand pull inflation

2. b. Cost pull inflation
3. c. Devaluation
4. d. Deflation
5. e. None of these
Answer: b
59. Question: Where is the Headquarter of International Moneytary Fund located?
1. a. Washington DC
2. b. London
3. c. Paris
4. d. Rome
5. e. None of them
Answer: a
60. Question: When you purchaes shares of corporate stock, then--
1. a. You have loaned money to the corporation

2. b. You own part of the corporation
3. c. You have made new funds available to the corporation
4. d. All of the above
5. e. None of these
Answer: b
61. Question: Reduction in the price of the most of the commodities and expenditure is
called--
1. a. Inflation
2. b. Deflation
3. c. Devaluation
4. d. Price index
Answer: b
62. Question: Gradual decrease in price level is called--
1. a. Inflation
2. b. Deflation
3. c. Devaluation
4. d. Deficit expenditure
5. e. None of them
Answer: b
63. Question: What do the leasing companies do?
1. a. Sell Assets
2. b. Buy Assets
3. c. Lend Money
4. d. Rent Assets
5. e. All of these
Answer: e
64. Question: The market in which transaction of long-term credit take place is called--
1. a. Free market
2. b. Money market
3. c. Monopoly market
4. d. Capital market
5. e. None of them
Answer: d

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Chapter 2 Overview of the Financial System

2.1 Multiple Choice Questions

A) information is the basis for decisions.

4) The risk premium on corporate bonds becomes smaller if

6) The liquidity premium theory of the term structure

9) Factors that influence interest rates on bonds include

10) Yield curves can be classified as

15) Financial innovation has caused

25) The Board of Governors

28) According to the author of your textbook, the Fed is

30) Federal Reserve independence is thought to

32) Critics of Fed independence argue

Financial Institutions and Financial Markets

True and False

2. Question: Which of the following Nationalized Commercial Bank of Bangladesh is

1. a. Somali Bank Ltd.

3. Question: Bangladesh Development Bank establish in--

4. Question: How many specialized banks in Bangladesh at present?

6. Question: Which of the following is not a commercial Bank?

1. a. Bangladesh Shilpa Bank

7. Question: IPO stands for--

1. a. Initial Public Offering

8. Question: Devaluation of money results in an increase in--

10. Question: What is the name of central Bank of Bangladesh?

1. a. National Bank of Bangladesh

11. Question: A 'bear market' means, that share price are--

12. Question: How many schedule banks in bangladesh at present?

13. Question: Other things remaining unchanged, what is likely to be a consequence of an

1. a. an increase in interest rates

1. a. a proportionate increase in the level of money income

18. Question: The first private sector bank in Bangladesh is--

1. a. National Bank Ltd.

20. Question: The founder of the Grameen Bank is--

1. a. Lutfur Rahman Sarker

22. Question: Dhaka Stock Exchange established in---

23. Question: How many foreign banks in bangladesh?

24. Question: Which organization is the regulator of the capital market?

1. a. Securities and Exchange Commission

1. a. National Bank of Pakistan

27. Question: 'Pari Passu' means--

1. a. Sonali Bank Ltd.

1. a. The deficit is financed by an increase in government borrowing from private

31. 32. Question: 'Blue Chips' are--

1. a. Securities issued by the Government

33. Question: In which year was Southeast Bank established?

34. Question: When was 'Bank of England' established?

35. Question: Grameen Bank is--

36. Question: How do commercial banks create money?

1. a. by cashing cheques for their customers

37. Question: The oldest private foreign Bank of our country:

1. a. Standard Chartered Bank

38. 39. Question: What Type of bank is the Exim Bank?

41. Question: Which is an investment bank in the public sector?

43. Question: Southest Bank is listed in:

44. Question: Which banks starts telephone banking in Bangladesh firstly?

45. Question: In which year was Grameen Bank established?

46. Question: Which of the following is the function of commercial bank?

48. Question: Which is the first privatized bank of Bangladesh?

1. a. National Bank Ltd.