1. ___money is a government-issued currency that is not backed by a commodity such as gold.
1. Dear Money
2. Near Money
3. Fiat Money
4. Hot money
5. Cheap money
Option “3” is correct. Fiat money is a government-issued currency that is not backed by a commodity such as gold. Fiat money gives central banks greater control over the economy because they can control how much money is printed. Most modern paper currencies, such as the U.S. dollar, Indian Rupee are fiat currencies.
2. Cheque, Bank notes, draft are example of __ money
1. Fiduciary Money
2. Near Money
3. Fiat Money
4. Hot money
5. Cheap money
Option “1” is correct. Fiduciary money refers to money backed up by trust between the payer and payee. Example: Cheques are fiduciary money as these are accepted as a means of payment on the basis of trust but not on the basis of any order of the government.
3. Central Government is ___ in the money market?
1. Borrower
2. Lender
3. Giver
4. Donator
5. None of the above
Option “1” is correct. Central Government is a borrower in the money market through the issue of Treasury Bills (T-Bills). The T-Bills are issued through the RBI. The T-Bills represent zero risk instruments. They are issued with tenure of 91 days (3 months), 182 days (6 months) and 364 days (1 year). Due to its risk free nature, banks, corporates and many such institutions buy the T-Bills and lend to the government as a part of it short- term borrowing programme.
4. The money market suffers from shortage of capital funds due to?
1. low saving capacity of the people
2. inadequate banking facilities, particularly in the rural areas;
3. undeveloped banking habits among the people.
4. All the above
5. None of the above
Option “4” is correct. Indian money market generally suffers from the shortage of capital funds. The availability of capital in the money market is insufficient to meet the needs of industry and trade in the country. The main reasons for the shortage of capital are- (a) low saving capacity of the people; (b) inadequate banking facilities, particularly in the rural areas; and (c) undeveloped banking habits among the people.
5. The money market has ___ interest rates-
1. Diversified
2. Uniform
3. stable
4. unstable
5. None of the above
Option “1” is correct. Indian money market has multiplicity and disparity of interest rates. In 1931, the Central Banking Enquiry Committee wrote- “The fact that a call rate of 3/4 per cent, a hundi rate of 3 per cent, a bank rate of 4 per cent, a bazar rate of small traders of 6.25 per cent and a Calcutta bazar rate for bills of small trader of 10 per cent can exist simultaneously indicates an extraordinary sluggishness of the movement of credit between various markets.”
6. Which of the following characteristics highlight undeveloped nature of money market in India?
1.It lacks sufficient and regular supply of short-term assets such as bills of exchange, treasury bills, short-term government bonds, etc.
2. Absence of sub-markets such as the acceptance market, commercial bill market, etc.
3. Different sectors of money market are properly coordinated
1. 1 and 2
2. 1 and 3
3. 1 only.
4. 2 only
5. 1,2,3
Option “1” is correct. It lacks sufficient and regular supply of short-term assets such as bills of exchange, treasury bills, short-term government bonds, etc. There is no uniformity in the interest rates which vary considerably among different financial institutions as well as centres, In the Indian money market, there are no dealers in short-term assets who can function as intermediaries between the government and the banking system, there is no proper coordination between the different sectors of the money market,
7. Which of the following steps can improve Indian Money Market?
1. Bringing the unorganised sector under the purview of RBI.
2. Providing discounting and rediscounting facilities.
3. Increasing the number of clearing houses
4. Reducing the variation in interest rate
5. All the above
Option “5” is correct. In a view of the various defects in the Indian money market, the following suggestions have been made for its proper development: (i) The activities of the indigenous banks should be brought under the effective control of the Reserve Bank of India. (ii) Discounting and rediscounting facilities should be expanded in a big way to develop the bill market in the country. (iii) For raising the efficiency of the money market, the number of the clearing houses in the country should be increased and their working improved. (iv) Variations in the interest rates should be reduced.
8. ___ is the apex body for secondary market of money market instruments
1. SEBI
2. Commercial Bank
3. NABARD
4. Discount and Finance House of Indian Limited
5. None of the above
Option “4” is correct. The Discount and Finance House of Indian Limited (DFHI) was established in 1988 with a view to increasing the liquidity of money market instruments. As a matter of policy, the aim of the DFHI is to increase the volume of turnover rather than to becomes the repository of money market instruments. The initial paid up capital of DFHI is Rs. 150 crores. Apart from this, it has lines of refinance from RBI and a line of credit from the consortium of public sector banks.
9. Commercial paper an Instrument of money market can be issued by?
1. Listed companies
2. RBI
3. Government
4. All the above
5. None of the above
Option “1” is correct. Commercial Paper (CP) can be issued by a listed company which has a net worth of at least Rs. 10 crores and a working capital limit of not less than Rs. 25 crore. CPs will be issued in multiples of Rs. 25 lakhs subject to the minimum size of an issue being Rs. 1 crore. Their maturity ranges from three months to six months. They will be freely transferable by endorsement and delivery. The company issuing CP will have to obtain every six months a specified rating from an agency approved by the Reserve Bank. The company can raise money through CP upto a maximum amount equivalent to 20% of its working capital limits. Banks will not be permitted to either underwrite or co- accept the issue of CP.
10. From the below money Instruments, on which, the rate of return is calculated on a ‘discount basis’?
1. Commercial paper
2. Commercial Bill
3. treasury bill
4. only a and b
5. All the above
Option “5” is correct. The bank discount bias, or discount yield, calculates the expected return of a bond sold at a discount to its par value, or face value. It is most often used to determine the yield on treasury bills, commercial paper, and municipal notes.
