Risk Management in Banks Objective Type Questions and Answers

Questions

21 Rule of 72 as a short cut method is explained by the formula:

A 72 divided by (annual interest rate multiplied by discount factor)

B Annual interest rate dividend by 72

C 72 divided by the annual interest rate

D None of these

Answer: 72 divided by the annual interest rate

22 Under Cash Budget System method employed for construction activities the working capital is determined by:

A Ascertaining level of current assets

B Ascertaining level of current liabilities

C Finding cash gap after taking into account projected periodical cash inflows and outflows

D All of the above

Answer: Finding cash gap after taking into account projected periodical cash inflows and outflows

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23 The formula to calculate the present value of a single cash flow is given by:

A C0 + C (1+r)n

B C2 / (1+r)

C CF1 / (1+r)n

D None of these

Answer: CF1 / (1+r)n

24 When there is a risk of loss resulting from inadequate or failed internal processes, people and systems or from external event, it is called

A Liquidity risk

B Systemic risk

C Moral Hazard

D Operational risk

Answer: Operational risk

25 Which of the following is not a major component of Market Risk?

A Interest rate risk

B Equity risk

C Foreign exchange risk

D Credit risk

Answer: Credit risk

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