If we ignore risk, the dividend discount model says the fundamental price of a stock is simply:

• A) The current dividend divided by the interest rate less the dividend growth rate
• B) The annual growth rate of the dividend minus the interest rate divided by the current dividend
• C) The current dividend divided by the dividend growth rate less the interest rate
• D) The current dividend divided by the interest rate plus the dividend growth rate

Projected change in interest rate is 2% and gap between interest rate sensitive assets and interest rate sensitive liabilities is Rs. -5600 (minus five thousand six hundred rupees). What will be the change in bank’s profit, after change in interest rate?
It will:

• A) Increase profits by Rs. 2800
• B) Decrease profits by Rs.112
• C) Increase profits by Rs.112
• D) Decrease profits by Rs. 2800

Which of the following is NOT a depository institution?

• A) Credit unions
• B) Savings institutions
• C) Brokerage house
• D) Commercial banks

Which of the following is included in the government-sponsored enterprise?

• A) All of the given options
• B) Small and Medium Enterprise (SME)
• C) House Building Finance Corporation (HBFC)
• D) Khushhali Bank

If we increase leverage in capital structure, what will be effect on Expected Return on Equity (ROE)?

• A) ROE and leverage have no relationship
• B) Return on equity will decrease
• C) Return on equity will remain constant
• D) Return on equity will increase

Which of the following are the primary uses of funds of depository institution?

• A) Mortgages, Consumer loans, Business loans
• B) Corporate bonds, Government bonds, Stocks
• C) Cash, loans, securities
• D) Commercial paper, Bonds, Mortgages

You are a bank customer and bank allowed you maximum loan facility up to Rs. 300,000. It would be called -------

• A) Line of credit
• B) Loan extension
• C) Loan recovery
• D) None of above

A bank can usually offer a saver a higher return for the same risk because:

• A) None of the given options
• B) The bank can pool the resources of larger savers and purchase lower denominated assets
• C) The bank can usually purchase assets at a higher cost than any one saver
• D) Economies of scale can be applied by the bank in its purchase of assets

Which of the following are the primary uses of funds of depository institution?

• A) Cash, loans, securities
• B) Commercial paper, Bonds, Mortgages
• C) Corporate bonds, Government bonds, Stocks
• D) Mortgages, Consumer loans, Business loans

A foreign borrower may not repay the bank’s loan because his government is prohibiting him to repay that loan. Such risk is called:

• A) Sovereign risk
• B) Value at risk
• C) Operational risk
• D) Trading risk

Which of the following are the primary uses of funds of Finance Company?

• A) Bonds, Bank loans, Commercial paper
• B) Commercial paper, Bonds, Mortgages
• C) Cash, loans, securities
• D) Corporate bonds, Government bonds

Which of the following is included in bank’s liabilities?

• A) Treasury bills
• B) Balances with other banks
• C) Deposits at the central bank
• D) Deposits of customers

Which of the following is not recommended solution for Moral Hazard?

• A) Apply restriction on borrower on used of amount
• B) Manager must invest significant their own resources
• C) Manger should be forced to report the owners
• D) None of the given options

Which of the following costs are reduced by financial intermediaries?

• A) Information cost and conversion cost
• B) Transaction cost and Information cost
• C) Transaction cost and product cost
• D) Transaction cost and hidden cost

Stock market bubbles can lead to:

• A) All of the given options
• B) Stock market crashes
• C) Patterns of volatile returns from the stock market
• D) An inefficient allocation of resources

---------- is considered private information?

• A) In-depth knowledge about the investment of company
• B) Liquidity position reveal by cash flow statement
• C) The dividend history reveal by the financial statement of company
• D) Knowledge about the dividend percentage before the announcement of dividend declaration

In long run investment__________?

• A) Both have the same risk
• B) None of the given options
• C) Bonds are less risky then stocks
• D) Stocks are less risky then bonds

Why banks do not prefer to manage the deposit withdrawals by adjusting the asset side of the balance sheet?

• A) It reduces bank size, as smaller the balance sheet, lower will be the profit.
• B) Asset adjustment is more costly and time consuming.
• C) It increases the size of the bank but reduces the profits in long run.
• D) To refuse to renew a customer loan is not possible for banks.

Which one of the following is NOT true for gap analysis?

• A) It is a formal study of what a business is doing currently and where it wants to go in the future
• B) It is the difference between the yield on interest sensitive assets and liabilities
• C) Banks manages credit risk by using gap analysis
• D) It is the difference in the maturity of assets and liabilities

Profitability of one bank may vary from the profitability of other banks due to following factor/s:

• A) Level of professional activities
• B) Efficient cost management
• C) All of the given options
• D) Size of the bank