ECONOMY UPSC + GROUP 1 + SSC

ECONOMY UPSC + GROUP 1 + SSC

QUESTION NO - 1
The difference between the bank rate and the repo rate is ____ basis
points, as per the monetary policy guidelines
1) 1 2) 25 3) 50 4) 100

REMEMBER
One percentage = 100 basis points
 ECONOMY UPSC + GROUP 1 + SSC

QUESTION NO - 2
Which of the following is not a refinance organisation?
1) Exim Bank 2) NABARD
3) Mudra Bank 4) EPFO
 ECONOMY UPSC + GROUP 1 + SSC

QUESTION NO - 3
In India, which of the following does not entail subsidy?
1) LPG 2) Kerosene
3) Diesel 4) Fertilisers

X
 ECONOMY UPSC + GROUP 1 + SSC

X X
 ECONOMY UPSC + GROUP 1 + SSC

QUESTION NO - 4
Which of the following carry lower interest?
1) Debentures 2) PSU Bonds
3) Tax Free Bonds 4) Any of these

Tax Free Bonds are normally permitted, when there is clear national interest to be served
ECONOMY UPSC + GROUP 1 + SSC
 ECONOMY UPSC + GROUP 1 + SSC

QUESTION NO - 5
Which of the following comes within the purview of RBI?
1) Issue of Govt. Securities
2) Regulation of Money Market
3) Implementation of Govt.s Market Borrowing Programme
4) All the above

In addition to above
Primary task of RBI is controlling inflation
Ensuring adequate credit at reasonable rates to
various sectors of the economy
Managing Foreign Exchange Reserves
Ensuring stable currency environment
 ECONOMY UPSC + GROUP 1 + SSC

QUESTION NO - 6
When prices fall continuously, the phenomenon is called ______.
1) Disinflation 2) Recession
3) Deflation 4) Reflation
 ECONOMY UPSC + GROUP 1 + SSC

QUESTION NO - 7
Which of the following entails high interest?
1) Govt. Securities 2) PSU Bonds
3) Debentures 4) Junk bonds

1 2 3 4

LOW RATED
COMPANIES
Govt. Securities
XXX & YYY
(Least interest) PSU Bonds Debentures Junk Bonds (Highest interest)
 ECONOMY UPSC + GROUP 1 + SSC

QUESTION NO - 8
Which of the following term does not pertain to bonds?
1) Yield 2) Coupon Rate
3) Dividend 4) None of these

BONDS SHARES

Yield Coupon Rate Dividend

 ECONOMY UPSC + GROUP 1 + SSC
SHARES

SHARE
CERTIFICATES

By purchasing shares, the investor will

become part-owner
These are called equity instruments SHARE HOLDERS /
If the company is performing well, it may EQUITY HOLDERS
declare dividend
 ECONOMY UPSC + GROUP 1 + SSC
BONDS / DEBENTURES

BOND

BORROWERS
In case of Bonds / Debentures, the
relationship is Borrower and Lender LENDERS
Bonds / Debentures have interest rate, which
is known as coupon rate
 ECONOMY UPSC + GROUP 1 + SSC
PRIMARY SELLING OF BONDS/ DEBENTURES SECONDARY
MARKET IN SECONDARY MARKET MARKET
ON PREMIUM
Coupon Here Rs.
Rate 10 Interest
10% is on bond
(Interest FACE VALUE RESALE VALUE resale
on Face RS. 100 RS. 110 value of Rs.
value) 110,
i.e., Rs. makes
10 every Coupon Yield of
Yield
year Rate 10% HENCE around 9%

When bond value is increased,

Rs. 10 yield is reduced (yield is less Rs. 10
Interest paid every year than the coupon rate) Interest paid every year

NOTE Only the concept of yield is explained for your understanding, but not yield to maturity.
 ECONOMY UPSC + GROUP 1 + SSC
PRIMARY SELLING OF BONDS/ DEBENTURES SECONDARY
MARKET IN SECONDARY MARKET MARKET
ON DISCOUNT
Coupon Here Rs.
Rate 10 Interest
10% is on bond
(Interest FACE VALUE RESALE VALUE resale
on Face RS. 100 RS. 90 value of Rs.
value) 90, makes
i.e., Rs. Yield of
10 every Coupon Yield around
year Rate 10% HENCE 11%
When bond value is decreased,
Rs. 10 yield is increased (yield is more Rs. 10
Interest paid every year than the coupon rate) Interest paid every year

NOTE Only the concept of yield is explained for your understanding, but not yield to maturity.