This document contains multiple choice questions from various units of a Treasury Management module. The questions cover topics like reserve requirements, integrated treasury operations, functions of treasury, globalization, exchange rates, nostro accounts, monetary aggregates, liquidity management tools of RBI, payment systems, risk management practices, derivatives, asset-liability management, and credit risk mitigation techniques. The answers to the multiple choice questions are also provided at the end of each unit's questions.

1. MODULE C TREASURY MANAGEMENT
Unit 14
1. What are the two reserve requirements that treasury has to comply with?
(a) PLR and SLR (b) CRR and SLR
(c) Repo and CRR (d) VaR and CRR
CRR and SLR
2.Integrated Treasury in Banking set up refers to
(a) Computerization of all bank branches
(b) Computerization of all treasury operations
(c) Centralization of all back office operations of forex branches
(d) Integration of money market, securities market and foreign exchange operations
Integration of money market, securities market and foreign exchange operations
3.What is the important operational feature of integrated treasury ?
(a) Having a common dealing room
(b) Having a common Mid/back offices
(c) Looking for interest arbitrage across currency markets and be in a position to shift swiftly, a
placement in Rupee denominated commercial paper to lending in USD in global interbank market
and also being to source funds in global markets and swap the funds into domestic currency or
vice versa, depending on market opportunities
(d) All the above
All the above
4. Treasury in the normal course will manage
(a) All funds raised through deposits
(b) All deployment of funds through advances
(c) Liquidity
(d) ALM book, Merchant book and Trading book
ALM book, Merchant book and Trading book
5. Globalization refers to
(a) Full convertibility of all currencies in the world
(b) Removal of all trade barriers in the world
(c) Fixed rate of exchange for all currencies of the world
(d) The process of integrating domestic market with global markets, characterized by free capital
flows and minimum regulatory intervention
The process of integrating domestic market with global markets, characterized by free capital flows
and minimum regulatory intervention
Answers to the MCQs
1. (b), 2. (d), 3. (d), 4. (d), 5. (d)
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Unit 15
Multiple Choice Questions
1. All the exchange rates quoted on the screen or in print are for mentioned unless otherwise
(a) Forward transactions (b) Cash transactions

2. (c) Spot transactions (d) Tom transactions
Spot transactions
2. Forward rates fully reflect interest rate differentials only in
(a) Controlled economies
(b) Developing economies
(c) Economies where interest rates are free
(d) In perfect markets where the currencies are fully convertible and the markets are highly liquid
In perfect markets where the currencies are fully convertible and the markets are highly liquid
3. 'Nostro' accounts are
(a) Accounts meant for reconciliation
(b) Accounts of foreign banks with Indian banks
(c) Current accounts denominated in foreign currency maintained by banks with their
correspondent banks in the home country of the currency
(d) Short term investments with AAA rated foreign banks
Current accounts denominated in foreign currency maintained by banks with their correspondent
banks in the home country of the currency
4. Notice money refers to
(a) Funds placed overnight
(b) Funds placed after giving a notice of placement
(c) Funds placed for periods in excess of 3 months but not exceeding 1 year
(d) Placement of funds beyond overnight but not exceeding 14 days
Placement of funds beyond overnight but not exceeding 14 days
5. The salient feature of convertible bond is
(a) Conversion of physical bonds into demat form
(b) Absence of coupon
(c) Automatic reinvestment in another bond on maturity
(d) Option to convert the bond in to equity on a fixed date or during a fixed period and the price is
pre-determined
Answers to the MCQs
1. (c), 2. (d), 3. (c), 4. (d), 5. (d)
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Unit 16
Multiple Choice Questions
1. The components of broad money(M3) are
(a)Cash in circulation with the public
(b)Cash in currency chests with RBI and Banks
(c)Credit availed by Central Government from RBI
(d)Currency in circulation, demand and time deposits with banks and post office saving deposits
Currency in circulation, demand and time deposits with banks and post office saving deposits

3. 2. The exemptions from DTL include
(a) Time deposits (b) Foreign outward remittances in transit
(c) Transactions in CBLO with CCIL (d) Overseas borrowings
Transactions in CBLO with CCIL
3. The liquidity corridor that RBI uses to control short term interest rates is defined/dictated by
(a) Repo and reverse repo rates (b) Call money market
(c) Bank rate (d) SLR and CRR
Repo and reverse repo rates
4. RTGS has beenfully activated by RBI from-------Where the settlements are on-------basis rather than
day end---------settlement of cheques in clearing house.
(a) August 2003, net, gross (b) October 2004, gross, net
(c) October 2004, net, gross (d) August 2004, gross, net
October 2004, gross, net
5. The following institutions facilitate delivery vs. payment(DVP)for secondary market deals in
equity and debt paper
(a) IDRBT (b) NDS (c) NSDL and CSDL (d) NEFT
NSDL and CSDL
Answers to the MCQs
1. (b), 2. (c), 3. (a), 4. (b), 5. (c)
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Unit 17.
Multiple Choice Questions
1.For ensuring effective risk control, RBI expects banks to facilitate functional segregation between
(a) Their Head office branches (b) Treasury and Head office
(c) Front office and IT department (d) Front office, Mid office and back office
Front office, Mid office and back office
2.The most important and well pronounced risk in treasury is
(a) Credit risk (b) Liquidity risk
(c) Market risk (d) Embedded option risk
Market risk
3.The following limits in treasury are meant for controlling market risk
(a)Counter party interbank exposure limits
(b)Settlement and pre-settlement limits
(c)Intra-day, overnight open position limit and stop loss limits
(d)Overseas borrowing limit prescribed by RBI
Intra-day, overnight open position limit and stop loss limits
4.Value at risk( VaR) is a statistical measure to capture

4. (a)Actual loss in portfolio
(b)Probable loss in a portfolio within a time horizon at a given confidence level
(c)Loss or profit in a trading activity
(d)Operational risk in treasury
Probable loss in a portfolio within a time horizon at a given confidence level
5.Yield and price of a bond move
(a) In inverse proportion (b) In direct proportion (c) In unrelated fashion (d) As determined by
bond issuer
In inverse proportion
Answers to the MCQs
1. (d), 2. (c), 3. (c), 4. (b), 5. (a)
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Unit 18
Multiple Choice Questions
1. The value of a derivative is determined by
(a) The value of the underlying (c) FIMMDA
(b) Notional principal amount (d) FEDAI
The value of the underlying
2. One of the essential differences between an OTC and an Exchange traded derivative is
(a) OTC derivatives are cheaper while Exchange traded derivatives are costly
(b) OTC derivatives are for customers while Exchange traded derivatives are for banks
(c) In OTC derivatives, counter party risk is prominent, whereas in exchange traded derivatives,
counter party risk is totally absent
(d) OTC derivatives are for hedging risks whereas Exchange traded derivatives are used for
speculation
In OTC derivatives, counter party risk is prominent, whereas in exchange traded derivatives, counter
party risk is totally absent
3.In case of free currencies, forward premium or discount is exactly equal to the difference between
(a) Risk-free interest rates of the two currencies
(b) Inflation rates in both the countries
(c) Spot rate and Tom rate
(d) LIBOR and RBI reference rate
Risk-free interest rates of the two currencies
4.A put option is in the money (ITM) if
(a) the strike price is less than market price
(b) the strike price is more than the market price
(c) the market price is equal to the strike price
(d) a put option can never be in the money
the strike price is more than the market price
5. In India, market for currency futures commenced in

5. (a) August 2008
(b) August 1993
(c) The market yet to commence operations
(d) The currency futures markets were existing for a long time but were lying dormant
August 2008
Answers to the MCQs
1. (a), 2. (c), 3. (a), 4. (b), 5. (a)
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Unit 19
Multiple Choice Questions
1.Liquidity risk is reflected as---------which is the gap in----------
(a) Maturity mismatch, cash inflow and outflow
(b)Total cash held, receipts and payments
(c)Committed lines, lines utilized and unutilized
(d)NPAs, total assets and performing loans
Maturity mismatch, cash inflow and outflow
2. In a rising interest rate scenario, the risk of erosion of NII is on account of
(a)Advances with floating rate of interest and deposits with fixed rate of interest
(b)Deposits with floating rates and advances with fixed rates
(c)Deposits with floating rates and advances with floating rates
(d)Deposits with fixed rates and advances with fixed rates
Deposits with floating rates and advances with fixed rates
3. Derivatives can be used to hedge aggregate risks as reflected in the asset-liability mismatches. In
this case a dynamic management of hedge is necessary' because _____
(a)The risks are dynamic
(b)New hedging tools arrive in the market
(c)The composition of assets and liabilities is always changing
(d)A close monitoring of hedge is an RBI requirement
The composition of assets and liabilities is always changing
4. The participants in the derivatives market generally exchange the following agreement
(a) IFEMA (b) ICON (c) ISDA (d)A stamped agreement devised by respective banks
ISDA
5. Credit derivatives segregate--------------- from the assets through instruments known as---------
and transfer the risk from the owner to another person who is in a position to absorb the credit risk
for -----------------
(a) The bad assets, NPAs, commission
(b) The credit risk, credit default swaps, a fee
(c) Income, warrants, consideration (d) Good assets, securitization, discount
The credit risk, credit default swaps, a fee
Answers to the MCQs

6. 1. (a), 2. (b), 3. (c), 4. (c), 5. (b)
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