Risk Management MCQs

Multiple Choice Questions 28 Pages

APJ Abdul Kalam Technological University

Bachelor of Finance Management

Contributed by

Prajwal Hallale

SUB: RISK MANAGEMENT (MODULE ONE)
CLASS: TYBCOM (FM) SEM VI
1. Risk is define as volatility of actual returns from _____. (Ans. investment )
(Profit, Saving, Investment, Deposit)
2. Risk and return have ______ relation. (Ans. Direct)
(Indirect, Direct, Neutral, Negative)
3. Rate of return on investment measured by __________. (Ans. I+(P1-P2)/P2)
[I+(P1-P2)/P2, I - (P1-P2)/P2), P1/ I+(P1-P2), P2/ I+(P1-P2)]
4. An investor invested Rs.200 in a share and sold at Rs.220 after a year, dividend
received Rs.10, rate of return on investment is _________. (Ans.0.15)
(0.15, 0.20, 1, 0.16)
5. An investor invested Rs.2000 in share of XYZ Ltd., after a year it has sold at Rs.2150,
thus capital gain for the investor is_______. (Ans.150 )
(200, 150, 50, 600)
6. Coupon of the bond is 15% to face value Rs.5000, interest received on investment
is____. (Ans. 750)
(750, 6000,650,360)
7. Investor brought a bond at discount rate 10% to face value 15,000, so gain to the
investor is _______. (Ans. 1350)
(2000, 5300, 1350, 4530)
8. _______ implies a situation where the future events are unknown. (Ans. uncertainty)
( Internal risk , External risk, Uncertainty, None of these)
9. _______cannot be measured and outcome is unknown. (Ans. Uncertainty)
(Probability, Risk, Certainty, Uncertainty)
10. Which of the following condition cause of strategic risk? (Ans. All of above)
(Weak execution of decisions, Insufficient resource allocation, Inability to respond well
to change in the market condition, All of above)
11. _____arises from failed internal process of organisation. (Ans. Operational risk)
(Market risk, Strategic risk, External risk, Operational risk)
12. Which of the following is advantages of T+2 rolling settlement? ( All of above)
(Reduces speculation, Uniform trading cycle, Reduce settlement period, All of above)
13. _______ can be eliminated by delivery v/s payment mechanism. ( counterparty risk)
(System risk, Counterparty risk, Operational risk, Legal risk)
14. Maintaining settlement guarantee fund helps to eliminate _____. (Ans. System risk)
(Non-business risk,Counterparty risk, System risk, Uncertainty)
15. When dividend received Rs.300, capital gains for investor is Rs.200 on the security at
the end of holding period and purchasing price of the security is Rs.500. Thus, Rate of
return is _________. (Ans. 1)
( 1.1, 0.8, 0.9, 1)
16.
Which of the following is not a part of human resource risk? (Ans. Market
competition)
(Knowledge and skill labour, Staffing, Employee theft, Market competition)
17. External risk arises from ______. (Ans. external market change)
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(Human resource, Financial relationship, Physical resource risk, External market
change)
18. Which techniques use to overcome from legal risk. (Ans. All of above)
(Conducting legal audit, Strong compliance government policies, Qualified legal
resources, All of above )
19. SEBI transitioned T+2 schedules with effect from _______. (Ans. 1
st
April 2003)
(1
st
April 2003, 10
th
Jan 2000, 1
st
June 2001, 5
th
July 1990)
20. Which of the following is not creating high degree of uncertainty? (Ans. Stable
economy)
(Increase global competition, Complex financial instruments, Change organisational
structure, Stable economy)
21. Mr. Patil brought a debenture of ABC Ltd. at Rs.__________, this was redeemed after a
year at Rs.100, coupon paid 9% and rate of return is 12%. (Ans. 97.32)
(98.2, 97.32, 90.54, 87.69)
22. Risk management process end with _________. (Ans. Monitor and review the risk)
(Identify risk, Monitor and review the risk, Analyse risk, Treat risk)
23. ________risk do not arise from board of company takes decision about production or
services. (Ans. Non business risk)
(Non business risk, Business risk, Operational risk, System risk)
24. Which of the following is feature of uncertainty. (Ans. Uncontrollable)
(Controllable, Uncontrollable, Measurable, Can be reduced)
25. Structural resource risk includes _________. (Ans. IT system)
(Disaster, Price and cost burden, IT system, Cash flow)
26. A company’s financial risk is associated with __________. (Ans. Financial leverage)
(Market condition, Companies reputation, Legal action, Financial leverage)
27. ____deals with a company’s ability to generate sufficient cash flow and able to make
interest payment. (Ans. Financial risk)
(Business risk, Operational risk, System risk, Financial risk)
28. Which of the following factor affects a company’s financial risk. (Ans. Interest rate
changes)
(Disaster, Legal action, Interest rate, Vender performance)
29. Financial reliability of the company is determine by ____. (Ans. Debt –equity ratio)
( Debt – equity ratio, Efficiency ratio, Working capital ratio, Cash ratio)
30. Businesses suffer by extending credit to customers are called ___. (Ans. Credit risk)
(Operational risk, Management risk, Market risk, Credit risk)
31. Liquidity risk arises, when _____.` (Ans. Asset /security cannot be traded quickly
in the market)
(Personal problems of company, Asset /security cannot be traded quickly in the market,
Increase competition in the market, Delay in payment )
32. Which of the following is cause of market risk? (Ans. change in consumer
preferences)
(Change in consumer preferences, Delayed in payment, Change in business model,
Change in operational model )
33. Credit rating for a firm with average size and debt repayment capacity is indicated by
_____. (Ans. ‘A’)
(AAA, A, C, CCC)
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34. Credit rating D assigned to the firm with _____. (Ans. Loss and no debt repaying
capacity)
(Good debt repaying capacity, Excellent debt repaying capacity, Average debt repaying
capacity, Loss and no debt repaying capacity)
35. _____indicates firms ability to fulfil its interest paying ability. (Ans. Interest
coverage ratio)
(Debt asset ratio, Interest coverage ratio, Debt service coverage ratio, Debt equity ratio)
36. Debt asset ratio = _________. (Ans. Total asset/ total debt)
(Debt/Equity, Total debt/ Total asset, Total asset/Total debt, Equity / Debt)
37. _____ technique used to hedge credit risk. (Ans. Risk based pricing)
(Risk based pricing, Shadow pricing, Market pricing, Foreign currency exchange)
38. Business risk associated with _____. (Ans. Economic environment)
(Debt fund, Leverage multiplier, Used debt capital, Economic environment)
39. Which of the following is not a feature of financial risk. (Ans. Risk cannot be
minimised)
(Used of debt capital, Risk cannot be minimised, debt to asset ratio, Lower the debt
lessor is financial risk)
40. ______is not business risk. (Ans. Credit risk)
(Operational risk, Reputation risk, Strategic risk, Credit risk)
41. ______identify by difference in net operating income and net cash flow. (Ans.
Business risk)
(Business risk, Credit risk, Liquidity risk, Market risk)
42. Business risk can be managed by ___. (Ans. All of the above)
(Write business plan, Train employees, Write risk management plan, All of above)
43. _____ provide protection to lender in case of increase in credit risk of borrower.
(Ans. Total return swap)
(Liquidity insurance, Total return swap, Liquidity securities, Trading exchange)
44. Risk base pricing technique characterise by ______. (Ans. deciding interest rate on
case to case basis)
(Credit insurance, Bond holders can hedge risk, Change in market value of the loan,
Deciding interest rate on case to case basis)
45. _____technique use to manage liquidity risk. (Ans. Investment in open ended fund)
(Investment in open ended fund, Risk based pricing, Credit default swap, Total return
swap)
46. Storing liquidity technique characterise by _____. (Ans. Keeping certain amount of
money as cash reserve)
(Purchasing a liquidity insurance, Limiting exposure to illiquid securities, Keeping
certain amount of money as cash reserve, Investing in open end fund)
47. Confirmation of trades take place on_________. (Ans. T+1 day)
(T+2 DAY, T+3DAY, T DAY, T+1 DAY)
48. ______assesses the credit worthiness of the borrower. (Ans. Credit rating)
( Uncertainty, Risk , Credit rating, Sensitivity analysis)
49. _____ is the risk arising due to use of debt financing in the capital structure. (Ans.
Financial risk)
(Financial risk, Market risk, Reputation risk, Operational risk)
50. Credit Rating Agencies (CRA) take in to consideration _____. (Ans. Track record of
promoters of firm)
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(Changing market condition, Changing economic policies, Marketing policies of a firm,
Track record of promoters of a firm)
******************

TYBFM RISK MANAGEMENT MODULE 2:EVALUATION OF RISK (MCQs)
1)

issquarerootofVarianceofrateofreturn.
(a)

Standarddeviation(b)Leverage(c)Beta(d)VaR
2)

referstochangeinoutputwithchangeinoneormoreInputvariables.
(a)

sensitivity(b)Beta(c)probability(d)Variance
3)

referstomaxmaximumlossonagivenassetoragivenperiodoftimeatagiven
confidence level.
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(a)

VaR(ValueatRisk)(b)β (c)α (d)standard
deviation4) iswidelyusedmeasuretocalculatemarketriskofaPortfolioor
security.
(a) VaR (b) Variance (c) β (d) Sensitivity Analysis
5)

Astockisconsideredtobe........ifactualreturnsexceedsexpectedreturns.
(a)Overvalued(b)undervalued(c)Negative(d)normal
6)

……..riskthatvalueofaPortfoliowilldecreaseduetothechangeinvalueofmarket
riskfactors.
(a)

Market(b)Commercial(c)political(d)
Reputation7) Istheriskthatarisesfromstock
pricevolatility.
(a) country Risk (b) political Risk (c) Market Risk (d) Equity Risk
8) ………istheriskthatarisesfromvolatilityofinterestrateineconomy.
(a)interestraterisk(b)MarketRisk(c)politicalrisk(d)Equityrisk
9) Riskarisesifthereismaturitymismatchbetweenliabilitiesandoffsettingassets.
(a)termstructurerisk(b)liquidityrisk(c)commercialrisk(d)dispute risk
10. lack of counterparty result into .................. risk.
(a)liquidityrisk(b)disputerisk(c)contractrisk(d)environmentalrisk
11)

REIT stands
(a)

Real Estate Investment Trust
(b)

RealEstateInvestment
Type(c)RightEstate
InvestmentTrust(d)Real
EstateIvestorsTrust
12)

ItismandatoryforREITtopayatleast...............percentageoftaxableincomeas
dividend
to investors.
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(a)80(b)90(c)40(d)50
13)

ShareofREITarefully………….
(a) transferable (b) non-transferable (c) redeemable (d) Irredeemable
14.Minimum number of share for REIT should be… ….
(a)100 (b)25 (c)50 (d)75
15. EquityREIT’smainsourceofrevenueisintheformof.............
(a) interest (b) Rent (c) dividend (d) capital
16. MainsourceofincomeformortgageREITis…………
(a) interest (b) Rent (c) dividend (d) capital
17)… ........ is the combination of equity and mortgage.
(a) Equity REIT (b) Mortgage REIT (c) Hybrid REIT (d) Beta REIT
18)… .... strategy is suitable for investors who have lower risk appetite.
(a) core strategy (b) Value added style (c) opportunistic style (d) simple strategy
19)……..strategy is suitable for high risk appetite investors.
(a)Corestrategy(b)Valueaddedstyle(c)Hedgingstyle(d)simplestrategy
20) ……..funds are unregulated as they are mainly for high net worth investors.
(a) Hedge funds (b) Private Equity (c) Mezzanine Capital (d) Managed futures
21)…..funds are suitable for small investors.
(a)Mutualfunds(b)Hedgefunds(c)FoF(d)ETF
22)

Amongallpreciousmetals…….isthemostpopularamonginvestors.
(a)Silver(b)Gold(c)platinum(d)diamond
23)

referstodifferencebetweentwointerestrates.
(a) Equity (b) commodity (c) spread (d) options
24)… ..... risk arising from volatility of exchange rate.
(a) option risk (b) currency risk (c) financial risk (d) business risk
25) ..... risk arising from fluctuation in commodity prices.
(a)Businessrisk(b)commodityrisk(c)creditrisk(d)facilityrisk

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26)

riskisassociatedwithenvironmentinwhichcompanyfunctions.
(a)Financialrisk(b)Businessrisk(c)Disputerisk(d)Communityrisk
27)

riskoccursmainlyduetowidedifferenceinbidandaskprice.
(a) Asset liquidity risk (b) funding liquidity risk (c) Documentation risk (d) facility risk
28)…….risk occurs due to inability to fulfill liabilities when they are falling due.
(a) Funding liquidity risk (b) Asset liquidity risk (c) Facility risk (d) financial risk
29)A decline in reputation of the organization to legal actions is called… …risk.
(a)Reputation(b)Dispute(c)contract(d)compliance
30) ……….risk arises when foreign government will default on its bonds or other financial
commitments.
(a) Country Risk (b) Political Risk (c) Financial Risk (d) Contract Risk
31)Hardware and software failures are included in… ..... risk.
(a)TechnologicalRisk(b)FinancialRisk(c)LegalRisk(d)Liquidity Risk
32)

Malwareandphishingarecommon sourceof….........risk.
(a)FinancialRisk(b)DisputeRisk(c)TechnologicalRisk(d)Liquidity Risk
33)

Technologicalriskinclude………
(a)Scamsandphishing(b)declineingoldprice(c)thirdpartinterference(d)Legaldispute
34)

……riskincludethreatofnegativeeffectsonlivingorganismandresourcedepletion.
(a)EnvironmentalRisk(b)ContractRisk(c)CountryRail(d)Financial Risk
35)

…………isthetotalexposedamountthatanorganizationwantstoundertakeonthebasis
ofRiskreturntrade‐off.
(a)RiskAppetite(b)Riskculture(c)Risktolerance(d)Risktarget
36)

……….istheamountofuncertaintyanorganizationispreparedtoacceptintotal.
(a)Riskappetite(b)Risktolerance(c)Riskculture(d)Riskcapacity
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37)

Normsandtraditionsofbehaviourofindividualsthatregulateandactontheriskis
called……….
(a)Riskappetite(b)RiskCulture(c)Risktolerance(d)Riskattitude

38)

stakeholdersarethosepeoplewhohavedirectrelationshipinthecompany.
(a)Internal(b)External(c)Supplier(d)Creditors
39)

………areprimarilyconcernedaboutsafetyandsecurityofitsmembers.
(a)TradeUnions(b)Employees(c)Suppliers(d)Customers

40)

Themainconcernofgovernmentistoensurecompanyisfulfillingit’s.......liability.
(a)Tax(b)jobs(c)credit(d) shares
41)

Employeesstakeholdersareconcernedabout…….
(a)Rateofpay(b)Taxliability(c)shares(d) customers
42)

VARisdenotedby……….
(a)C(b)K(c)m(d) p
43)

iscalculatedatasuitableconfidencelevel.
(a) Variance (b) VaR (c) standard deviation (d) Beta
44)

Fundswhichhave……..Ofgreaterthan1are aggressive.
(a) variance (b) S. D (C) β (d) VaR
45)

…….arenotsuitableforinvestorswithlessriskappetite.
(a) β (b) variance (c) α (d) sensitivity
46)

FundswhichhaveaBetaifgreaterthan1are……..
(a) Aggressive (b) Regressive (c) purposive (d) objective
47) ......... is prime importance foe hedging.
(a)SensitivityAnalysis(b)VaR(c)variance(d)β48)A
typicalwayofcalculatingEMVisusing……..
(a)DecisionTrees(b)variance(c)VaR(d)β
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49) DecisiontreeAnalysisisatoolfor….Riskmeasurement.
(a)Quantitative(b)Qualitative(c)purposive(d)subjective
50) Tornadodiagramsareusefulfordetermining……………
(a)sensitivityAnalysis(b)Variance(c)β(d)standard Deviation

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ModuleIII–Foreignexchangerisk

1. The value for which one currency is exchanged for another currency is called
__________________
a.Marketrate
b.Exchangerate
c.Pricerate
d.Currencyrate

2.Forexmarketconsistsof__________________
1.Wholesalemarketandretailmarket
2.Centralmarketandlocalmarket
3.Fixedmarketandflexiblemarket
4.Interbankmarket

3.Interbankforeignexchangetradingisregulatedby________________
a.FERA
b.FEMA
c.FEDAI
d.CCIL

4.Whichofthefollowingisnotaparticipantinforexmarket?
a.Commercialbanks
b.Trustees
c.Foreignexchangebrokers
d.Centralbanks

5._____________markethandlesonlycurrenttransactions.
a.Forward
b.Nostro
c.Spot
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Risk Management MCQs

Risk Management MCQs

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