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Question: 76


Statement 1: The Yields on the MBS PTCs are normally higher than the yields on the corporate bonds of similar ratings. Statement 2: The reason for difference in yields on the corporate bonds and similarly rated PTCs is on account of the optionality in the PTC, the unfamiliarity of the structure and uncertainties in respect of legal and structural issues. Which of the above statements is correct?


  1. None of the statements

  2. Both the statements

  3. Only Statement 2 is correct

  4. Only Statement 1 is correct


Answer: D


Question: 77


Which of the following is NOT a conceptual definition of credit risk on which credit models are based?


  1. Default Mode Paradigm

  2. Value-at-Risk paradigm

  3. Mark-to-Market Paradigm


Answer: B


Question: 78


Which of the following is false in case of credit enhancements?


  1. It reduces the default risk of the borrowing entity for the lender, thereby deteriorating the overall credit worthiness of the borrower

  2. Credit enhancement could be implicit or explicit

  3. Credit enhancement is a mechanism whereby external cash flows is extended by an entity which has a stringer credit profile, so that it benefits the fund raising entity

Question: 79


Short term rates are determined by


  1. All of the other options

  2. Liquidity position caused by seasonal demand supply for credit

  3. Foreign portfolio investment inflows and outflows

  4. Bunching of tax and government payments


Answer: B


Question: 80


Which of the following factor is considered while undertaking management evaluation?


  1. All of the other options

  2. Corporate Strategy

  3. Performance of group concerns

  4. Past track record


Answer: D


Question: 81


The cycle is the length of time between the company's outflow on raw materials and the manufacturing expenses and the inflow of cash from the sale of goods.


  1. Cash flow mismatch

  2. Money

  3. Running

  4. Operating


Answer: D


Question: 82


Step up upon feature will lead to


  1. no change as step is not linked to issuers rating

  2. positive basis because the bond holder is compensated

  3. negative basis given that the bondholder is not compensated

Answer: B


Question: 83


Provisioning Coverage Ratio (PCR) is essentially the ratio of provisioning to and indicates the extent of funds a bank has kept aside to cover loan losses.


  1. total loan portfolio

  2. gross non-performing assets

  3. total assets


Answer: B


Question: 84


Strategy consists of buying a bond with maturity longer than the investment horizon (for investor) or buying a long-maturity bond with short-term funding through repo (for speculator).


  1. Barbell, Ladder and Butterfly

  2. Yield Spread Anticipation

  3. Rate Anticipation with Maturity Mismatch

  4. Riding the yield curve


Answer: D


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