INSIGHTS STATIC QUIZ 2020 - 21
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Question 1 of 5
1. Question
A share repurchase or buyback is a decision by a company to purchase its own stock from the market. Such a move may lead to
- It reduces the number of outstanding shares of the company.
- It tends to increase the price of remaining shares.
- It is often undertaken when the company’s shares are undervalued.
Select the correct answer code:
Correct
Solution: d)
What is a share buyback?
A share repurchase or buyback is a decision by a company to purchase its own stock from the market. Such a move reduces the number of outstanding shares of the company and tend to push up their price and is often undertaken when management considers the company’s shares undervalued.
It is also a key way to transfer surplus earnings to shareholders and tends to lead to an increase in share prices.
Incorrect
Solution: d)
What is a share buyback?
A share repurchase or buyback is a decision by a company to purchase its own stock from the market. Such a move reduces the number of outstanding shares of the company and tend to push up their price and is often undertaken when management considers the company’s shares undervalued.
It is also a key way to transfer surplus earnings to shareholders and tends to lead to an increase in share prices.
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Question 2 of 5
2. Question
Consider the following statements regarding Monetary Policy.
- The Reserve Bank of India (RBI) is vested with the responsibility of conducting monetary policy under the provisions of Reserve Bank of India Act, 1934.
- The primary objective of monetary policy is to maintain price stability and achieve growth.
- The inflation target is set by the Reserve Bank of India in consultation with Government of India, once in every five years.
Which of the above statements is/are correct?
Correct
Solution: a)
Monetary policy refers to the policy of the central bank with regard to the use of monetary instruments under its control to achieve the goals specified in the Act.
The Reserve Bank of India (RBI) is vested with the responsibility of conducting monetary policy. This responsibility is explicitly mandated under the Reserve Bank of India Act, 1934.
The primary objective of monetary policy is to maintain price stability while keeping in mind the objective of growth. Price stability is a necessary precondition to sustainable growth.
In May 2016, the Reserve Bank of India (RBI) Act, 1934 was amended to provide a statutory basis for the implementation of the flexible inflation targeting framework.
The amended RBI Act also provides for the inflation target to be set by the Government of India, in consultation with the Reserve Bank, once in every five years. Accordingly, the Central Government has notified in the Official Gazette 4 per cent Consumer Price Index (CPI) inflation as the target for the period from August 5, 2016 to March 31, 2021 with the upper tolerance limit of 6 per cent and the lower tolerance limit of 2 per cent.
Prior to the amendment in the RBI Act in May 2016, the flexible inflation targeting framework was governed by an Agreement on Monetary Policy Framework between the Government and the Reserve Bank of India of February 20, 2015.
Incorrect
Solution: a)
Monetary policy refers to the policy of the central bank with regard to the use of monetary instruments under its control to achieve the goals specified in the Act.
The Reserve Bank of India (RBI) is vested with the responsibility of conducting monetary policy. This responsibility is explicitly mandated under the Reserve Bank of India Act, 1934.
The primary objective of monetary policy is to maintain price stability while keeping in mind the objective of growth. Price stability is a necessary precondition to sustainable growth.
In May 2016, the Reserve Bank of India (RBI) Act, 1934 was amended to provide a statutory basis for the implementation of the flexible inflation targeting framework.
The amended RBI Act also provides for the inflation target to be set by the Government of India, in consultation with the Reserve Bank, once in every five years. Accordingly, the Central Government has notified in the Official Gazette 4 per cent Consumer Price Index (CPI) inflation as the target for the period from August 5, 2016 to March 31, 2021 with the upper tolerance limit of 6 per cent and the lower tolerance limit of 2 per cent.
Prior to the amendment in the RBI Act in May 2016, the flexible inflation targeting framework was governed by an Agreement on Monetary Policy Framework between the Government and the Reserve Bank of India of February 20, 2015.
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Question 3 of 5
3. Question
Which of the following are regulated by Reserve Bank of India (RBI)?
- Stock-Exchanges
- Merchant Banking Companies
- Venture Capital Fund Companies
Select the correct answer code:
Correct
Solution: d)
Merchant Banker/Venture Capital Fund Company/stock-exchanges/stock brokers/sub-brokers are regulated by Securities and Exchange Board of India, and Insurance companies are regulated by Insurance Regulatory and Development Authority. Similarly, Chit Fund Companies are regulated by the respective State Governments and Nidhi Companies are regulated by Ministry of Corporate Affairs, Government of India. Companies that do financial business but are regulated by other regulators are given specific exemption by the Reserve Bank from its regulatory requirements for avoiding duality of regulation.
Incorrect
Solution: d)
Merchant Banker/Venture Capital Fund Company/stock-exchanges/stock brokers/sub-brokers are regulated by Securities and Exchange Board of India, and Insurance companies are regulated by Insurance Regulatory and Development Authority. Similarly, Chit Fund Companies are regulated by the respective State Governments and Nidhi Companies are regulated by Ministry of Corporate Affairs, Government of India. Companies that do financial business but are regulated by other regulators are given specific exemption by the Reserve Bank from its regulatory requirements for avoiding duality of regulation.
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Question 4 of 5
4. Question
Consider the following statements regarding Angel Investors.
- Angel Investors are high-net-worth individuals, who generally buy back failed firms for asset restructuring.
- The funds angel investors provide may be a one-time investment to help the business propel or an ongoing injection of money to support and carry the company.
Which of the above statements is/are incorrect?
Correct
Solution: a)
An angel investor (also known as a private investor, seed investor or angel funder) is a high-net-worth individual who provides financial backing for small startups or entrepreneurs, typically in exchange for ownership equity in the company.
Often, angel investors are found among an entrepreneur’s family and friends.
The funds that angel investors provide may be a one-time investment to help the business get off the ground or an ongoing injection to support and carry the company through its difficult early stages.
Incorrect
Solution: a)
An angel investor (also known as a private investor, seed investor or angel funder) is a high-net-worth individual who provides financial backing for small startups or entrepreneurs, typically in exchange for ownership equity in the company.
Often, angel investors are found among an entrepreneur’s family and friends.
The funds that angel investors provide may be a one-time investment to help the business get off the ground or an ongoing injection to support and carry the company through its difficult early stages.
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Question 5 of 5
5. Question
Hard currency is usually preferred because
- It is seen as politically and economically stable.
- It is widely accepted around the world as a form of payment for goods and services.
- It is not likely to depreciate or appreciate suddenly.
Select the correct answer code:
Correct
Solution: c)
Hard currency refers to money that is issued by a nation that is seen as politically and economically stable. Hard currencies are widely accepted around the world as a form of payment for goods and services and may be preferred over the domestic currency.
A hard currency is expected to remain relatively stable through a short period of time, and to be highly liquid in the forex or foreign exchange (FX) market. The most tradable currencies in the world are the U.S. dollar (USD), European euro (EUR), Japanese yen (JPY), British pound (GBP), Swiss franc (CHF), Canadian dollar (CAD) and the Australian dollar (AUD). All of these currencies have the confidence of international investors and businesses because they are not generally prone to dramatic depreciation or appreciation.
Incorrect
Solution: c)
Hard currency refers to money that is issued by a nation that is seen as politically and economically stable. Hard currencies are widely accepted around the world as a form of payment for goods and services and may be preferred over the domestic currency.
A hard currency is expected to remain relatively stable through a short period of time, and to be highly liquid in the forex or foreign exchange (FX) market. The most tradable currencies in the world are the U.S. dollar (USD), European euro (EUR), Japanese yen (JPY), British pound (GBP), Swiss franc (CHF), Canadian dollar (CAD) and the Australian dollar (AUD). All of these currencies have the confidence of international investors and businesses because they are not generally prone to dramatic depreciation or appreciation.
