Paper/Subject Code: 86005/Elective: Finance: Innovative Financial Services
TYBMS SEM 6:
Finance:
Innovative Financial Services
(Objective Question with Solution)
April 2024
Q1. (A) Select the correct answer from the multiple choice questions (Any8) (8)
Q-1B) Answer the statement true or false (any 7)
1) NBFCs hold a banking license.
Ans: False
2) Factoring is a fund based financial service.
Ans: True
3) Clean Bills are accompanied with proper documents.
Ans: False
4) Unsubscribed shares of the companies are purchased by brokers.
Ans: True
5) The SARFAESI Act has been enacted to regulate Factoring.
Ans: False
6) Lessee is the person getting the benefit of ässet taken on Lease,
Ans: True
7) NHB is a wholly owned company of SEBI.
Ans: False
8) The effective rate of interest on consumer finance is much lower than the rates applicable to business finance.
Ans: True
9) Credit score shows the credit worthiness of a borrower.
Ans: False
10) Issuers with lower crèdit ratings pay higher interest rates embodying larger risk premiums than high credit rated companies.
Ans: True
Q1. (A) Select the correct answer from the multiple choice questions (Any8)
Q.1 ________ is a privilege of credit card offered to the family members.
(a) Add-on cards
(b) Credit cards
(c) Debit cards
(d) Health cards
2. It is mandatory that all public issues should be managed by _________ functioning as the lead managers.
(a) Underwriters
(b) Brokers
(c) Bankers
(d) Merchant Bankers
3. ________ is fund based services.
(a) Credit Rating
(b) Stock broking
(c) Hire purchase.
(d) Custodian services
4. Apex institution of housing sector is
(a) National Housing Banks
(b) SEBI
(c) NABARD
(d)IDBI
5. Under forfaiting the client is able to get credit facility to the extent of ______
(a) 60% of the value of the export bill
(b) 80% of the value of the export bill
(c) 100% of the value of the export bill
(d) 20% of the value of the export bill
6. In accordance with the bill rediscounting scheme, the bill should have maximum of _______ days.
(a) 60
(b) 90
(c) 180
(d) 360
7. Credit Protection is available in _______.
(a) Without Recourse factoring
(b) With recourse factoring
(c) Bill discounting
(d) securitization
8. ________ is the process of updating the accounts of the trading parties.
(a) Underwriting
(b) Clearing
(c) Banking
(d) securitization
9. refers to the raising of finance by individual for the acquisition of durable consumer goods.
(a) Factoring
(b) Leasing
(c) Bill discounting
(d) Consumer Finance
10. Category Merchant banker can act only as advisor or consultant to an issue.
(a) 1
(b) II
(c) III
(d) IV
Q1 . (B) State whether following statements are True or False (Any 7): (7)
1. Bill Discounting is a short term source of finance.
Ans: True: Bill discounting is a way to get short-term funds by selling unpaid invoices to a bank at a discounted price.
2. A certificate of registration should be obtained from SEBI to act as a clearing member.
Ans: True: SEBI (Securities and Exchange Board of India) regulates clearing activities, and a registration certificate is mandatory.
3. Lessor is the owner of the property or assets who gives it on lease.
Ans: True: In leasing, the lessor owns the leased asset and grants temporary usage rights to the lessee.
4. Smart card is a tiny integrated circuit chip card.
ANs: True: Smart cards have embedded chips for secure transactions and data storage.
5. The first credit rating agency in India is CRISIL.
Ans: True: CRISIL (Credit Rating Information Services of India Limited) is a prominent credit rating agency in India.
6. PIN stands for Personal Identification Name.
Ans: True: PIN (Personal Identification Number) is used for secure access to accounts and transactions.
7. The non-fund based services are called asset based services.
Ans: False: Non-fund based services don't involve direct lending. They provide guarantees, standby lines of credit, etc. Asset-based financing uses assets as collateral for loans.
8. The rolling settlement system is adopted by RBL
Ans: False. RBL does not adopt the rolling settlement system.
9. CIBIL Rank is between land 10 with 1 being worst and 10 being best
Ans: True: CIBIL (Credit Information Bureau (India) Limited) assigns credit scores typically ranging from 300 to 900, with a higher score indicating better creditworthiness.
10. AAA long term debt instruments carry highest credit risk.
Ans: False AAA denotes the highest creditworthiness, indicating minimal risk of default. Lower ratings (e.g., D) suggest higher risk.
November 2019
Q1 A) Multiple choice questions (Attempt any 8 out of 10)
1) The quality of financial service rendered changes from customer to customer. This characteristic of financial services is called ________.
(a) Perishability
(b) Variability
(c) Intangibility
(d) Inseparability
2) The owner of the equipment in a lease contract is called,
(a) Lender
(b) Lessor
(c) Lessee
(d) Buyer
3) The regulator of Housing Finance Companies is
(a) RBI
(b) HUDCO
(c) NHB
(d) HDFC
4) A Clearing member who is not a Trading member is called
(a)Trading member
(b) Trading cum self clearing member
(c) Trading cum clearing member
(d) Professional clearing member
5) To act as a underwriter, Certificate of Registration must be obtained from
(a) SEBI
(b) RBI
(c) Ministry of Finance
(d) Ministry of Corporate Affairs
6) The order which if not traded will remain in the system till it is cancelled or the series expires, whichever is earlier is called as
(a) Good for Day
(b) Good till Cancelled
(c) Good till date
(d) Limit Order
7) is the process of converting illiquid, non-negotiable financial assets into securities of small value which are tradable.
(a) Consumer Finance
(b) Hire Purchase
(c) Securitization
(d) Credit Rating
8) Credit card facility is an excellent example of
(a) Cash credit
(b) Revolving credit
(c) Secured credit
(d) Term loan
9) Venture capital involves _______level of risk.
(a) No (b) Low (c) Medium (d) High
10) The first credit rating agency in India is
(a) ICICI (b) CRISIL (c) CARE (d) ICRA
B) State whether the following statements are True or False (Attempt any 7)
1) Forfaiting is a non-fund based facility.
Ans: True
2) Venture capital helps to create entrepreneurs.
Ans: True
3) Factoring service is provided only for a specific bill of exchange.
Ans: False
4) Bills discounting is a without recourse transaction.
Ans: True
5) Merchant banking business is regulated by SEBI.
Ans: True
6) By selling off loans through securitization, banks are able to improve their capital adequacy ratio.
Ans: True
7) Debit card allows the customers to spend today and pay tomorrow.
Ans: False
8) Credit score shows the creditworthiness of a borrower.
Ans: True
9) The ALM process rests on three pillars ALM Information System, ALM organization and ALM Process.
Ans: True
10) In Instalment Sale, the ownership of the asset is transferred to the buyer immediately at the time of sale.
Ans: False
Q.1 (A) State whether the following statements are True or False (Attempt any 7)
1. Financial services do not have physical existence.
Ans: True - Financial services are intangible and don't have a physical presence.
2. Cost of Factoring Finance cost-Operating cost
Ans: False - The cost of factoring includes finance cost and administrative costs, but there might be other costs involved as well, such as credit risk costs.
3. There are 5 types of underwriters.
Ans: False - There may be more or fewer types of underwriters depending on the context. Five types might be a simplification or specific to certain markets.
4. In Venture Capital, Mezzanine Financing is the part of Expansion capital stage.
Ans: True - Mezzanine financing often occurs in the expansion stage of venture capital, providing a mix of debt and equity financing.
5. Revolving credit is very much like the overdraft facility provided by banks.
Ans: True - Revolving credit is similar to an overdraft in that it allows borrowing up to a certain limit, repaying, and borrowing again, similar to how an overdraft works.
6. Bills of exchange cannot be rediscounted.
Ans: False - Bills of exchange can be rediscounted, which means selling them at a discount to another party before they mature.
7. Sub broker can operate only on behalf of registered Flls. He cannot deal in securities on his own account as principal.
ANs: True - A sub-broker typically acts on behalf of registered entities and cannot trade securities on their own account.
8. Debit card is also called Electronic Cheque,
Ans: False - A debit card is not the same as an electronic check. A debit card allows direct access to funds in a bank account for purchases or withdrawals, while an electronic check is a digital version of a traditional paper check.
9. Home loan is available for purchase of land as well as improvement/extension of house.
Ans: True - Home loans can be used for various purposes related to housing, including purchasing land or improving/extending a house.
10. CRISIL is the leading credit rating agency in the world.
Ans: False - CRISIL is a prominent credit rating agency, especially in India, but it is not considered the leading credit rating agency globally. Agencies like Moody's, Standard & Poor's, and Fitch Ratings are among the most globally recognized.
(B) Match the columns (any 8)
Column “A” | Column “B” | ||
1. | DRT | a | Hundis |
2 | Underwriter | b | Usance |
3 | Corporate counseling | c | T-bills |
4 | Time bills | d. | Act of guarantee for sale of shares & debentures |
5 | Securitisation instrument | e. | Fund based |
6 | Whole sale Debt Market | f. | Debt Recovery Tribunal |
7 | Financial Services | g. | Moody’s |
8 | Indigenous bills | h. | Fee Based |
9 | Housing Finance | i. | Mobilization of savings |
10 | Credit Rating Agency | j. | Pass through securities |
|
| L | Data response tribunal |
Ans:
Column “A” | Column “B” | ||
1. | DRT | f. | Debt Recovery Tribunal |
2 | Underwriter | d. | Act of guarantee for sale of shares & debentures |
3 | Corporate counseling | h. | Fee based |
4 | Time bills | b. | Usance |
5 | Securitisation instrument | j. | Pass through securities |
6 | Whole sale Debt Market | e. | Fund based |
7 | Financial Services | a. | Hundis |
8 | Indigenous bills | c. | T-bill |
9 | Housing Finance | i. | Mobilization of savings |
10 | Credit Rating Agency | g. | Moody’s |
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