Finance & Management (FM) Questions For RBI Grade B Phase II 2023 | Set-17

Correct Answer: C. Points out to the need for corporate governance, in the form of an efficient code of conduct for corporate managements.

Explanation: A hostile takeover is the acquisition of one company (called the target company) by another (called the acquirer) that is accomplished by going directly to the company’s shareholders or fighting to replace management to get the acquisition approved. A hostile takeover can be accomplished through either a tender offer or a proxy fight. The key characteristic of a hostile takeover is that the target company’s management does not want the deal to go through. Hostile Take-Overs of corporations witnessed in several countries, put a question mark on the efficiency of managements of take-over companies. This factor also points out to the need for corporate governance, in the form of an efficient code of conduct for corporate managements.

Correct Answer: E. 50

Explanation: Private Placement When a company offers its shares to a select group of persons not exceeding 49, and which is neither a rights issue nor a public issue, it is called a private placement. Often a combination of public issue and private placement can be used by the companies for the issue of securities in the primary market. Privately placed securities are often not publicly tradable and may only be bought and sold by sophisticated qualified investors. As a result, the secondary market is not liquid as in the case of a private issue. There are SEBI guidelines, which regulate the private placement of securities by a company. Private placement is the fastest way for a company to raise equity capital. Private placement can of two types viz. preferential allotment and qualified institutional placement.

Correct Answer: B. 19th

Explanation: The practice of management is as old as human civilization. The ancient civilizations of Egypt (the great pyramids), Greece (leadership and war tactics of Alexander the great) and Rome displayed the marvelous results of good management practices. The origin of management as a discipline was developed in the late 19th century. Over time, management thinkers have sought ways to organize and classify the voluminous information about management that has been collected and disseminated. These attempts at classification have resulted in the identification of management approaches. The approaches of management are theoretical frameworks for the study of management. Each of the approaches of management is based on somewhat different assumptions about human beings and the organizations for which they work.

Correct Answer: C. 14049.28

Explanation: By using formula of Future Value = PV x CVF(1+i) n
=1,000 x (1+.12)3
=1,000 x 1.404928
=14,049.28

Correct Answer: C. Derivative instrument

Explanation: CDS (credit default swap) is a derivative instrument whose value is based on the risk of default (less any recovery value) of the underlying asset (called the reference obligation). Its a financial contract whereby a buyer of corporate or sovereign debt in the form of bonds attempts to eliminate possible loss arising from default by the issuer of the bonds. This is achieved by the issuer of the bonds insuring the buyer’s potential losses as part of the agreement.

Correct Answer: A. Stagflation

Explanation: Stagflation is when economic growth is stagnant but there still is price inflation. This seems contradictory, if not impossible. Why would prices go up when there isn’t enough demand to stoke economic growth? It happened in the 1970s when the United States abandoned the gold standard. Once the dollar’s value was no longer tied to gold, it plummeted. At the same time, the price of gold skyrocketed.
Stagflation didn’t end until Federal Reserve Chairman Paul Volcker raised the fed funds rate to the double-digits. He kept it there long enough to dispel expectations of further inflation. Because it was such an unusual situation, stagflation probably won’t happen again.

Correct Answer: D. Basel 1 norms

Explanation: The 1988 Basel Accord also known as Basel I primarily focused on credit risk. The Central Banks of several countries that have agreed to become signatories have been given the responsibility of enforcing the provisions. In India, the Reserve Bank of India shoulders this responsibility. The second of the Basel Accords, Basel II was first published in June 2004 and established in 2005. This accord widened the scope of Basel I by establishing capital requirements for market risk and operational risk, in addition to credit risk.

Correct Answer: B. Walking inflation

Explanation: This type of strong, or pernicious, inflation is between 3-10 percent a year. It is harmful to the economy because it heats up economic growth too fast. People start to buy more than they need, just to avoid tomorrow’s much higher prices. This drives demand even further, so that suppliers can’t keep up. More important, neither can wages. As a result, common goods and services are priced out of the reach of most people.

Correct Answer: A. 0%

Explanation: Treasury Bills are debt instruments issued by Government of India to meet the short term liquidity needs of the Government to bridge the gap between revenue and expenditure. Primarily, these are issued under the normal auction programme of the Government, and also provide option for non-competitive bids. Currently 91-days, 182-days and 364-days treasury bills are issued on a regular basis. The amount for weekly auction of 91-days Treasury bill and fortnightly auction of 182-days and 364days treasury bills are notified in quarterly calendar. Treasury bills are zero coupon securities and pay no interest. They are issued at a discount and redeemed at the face value at maturity. Characteristics like high liquidity and no risk have made Treasury Bills attractive instrument for short-term investment by banks, primary dealers, other financial institutions and corporate.

Correct Answer: B. 2070.76

Explanation: The value of the bond is
V = I (PVIFAkd, n) + F (PVIFkd, n)
= 280 (PVIFA 13%, 5) + 2000 (PVIF 13%, 5)
= 280 (3.517) + 2000 (.543)
= Rs. 2070.76