Treasury bills CD CP MCQ | JAIIB PPB MCQ

March 29, 2021
Treasury bills certificate of deposit commercial paper MCQ

Here is the next quiz in the quiz/MCQ series for Principles and Practices of Banking. This quiz covers the topics of Treasury bills CD CP MCQ. Answers are given at the end of the quiz.

Q1. How many types of treasury bills are issued in India? 

  1. One
  2. Two
  3. Three
  4. Four

Answer: (3)
Treasury bills (T-bills) offer short-term investment opportunities, generally up to one year. They are thus useful in managing short-term liquidity. At present, the Government of India issues three types of treasury bills

Q2. Which among the following is not a type of treasury bill issued in India?
  1. 45 day
  2. 91 day
  3. 182 day
  4. 364 day

Answer: (1)
Treasury bills (T-bills) offer short-term investment opportunities, generally up to one year. They are thus useful in managing short-term liquidity. At present, the Government of India issues three types of treasury bills, namely, 91-day, 182-day and 364-day

Q3. In India, Treasury bill is quoted at discounted price to par value of _____? 
  1. Rs 50
  2. Rs 100
  3. Rs 150
  4. Rs 200

Answer: (2)
T-bills are issued at a discount from the par value (also known as the face value, generally Rs 100) of the bill, meaning the purchase price is less than the face value of the bill.

Q4. What is the minimum tradable amount at which treasury bill is quoted in secondary market? 
  1. Rs 5,00,000
  2. Rs 2,50,000
  3. Rs 1,00,000
  4. Rs 25,000

Answer: (4)
Treasury bills are issued at a minimum price of Rs. 25000 and in the same multiples thereof.

Q5. The tenor of certificate of deposit issued by commercial banks ranges from ______ to ________
  1. 7 days, 1 year
  2. 14 days, 1 year
  3. 1 year, 3 years
  4. 14 days, 3 years

Answer: (1)
The tenure for Certificates of Deposit issued by commercial banks varies between 7 days and 1 year

Q6. The tenor of certificate of deposit issued by Financial Institutions (FIs) ranges from ______ to ________
  1. 7 days, 1 year
  2. 14 days, 1 year
  3. 1 year, 3 years
  4. 14 days, 3 years

Answer: (3)
The maturity term for CDs issued by financial institutions varies from 1 year to 3 years.

Q7. What is the minimum amount for which certificate of deposit can be issued?  
  1. Rs 5,00,000
  2. Rs 1,00,000
  3. Rs 50,000
  4. Rs 25,000

Answer: (2)
Minimum amount of a Certificate of Deposit (CD) should be Rs.1 lakh, i.e., the minimum deposit that could be accepted from a single subscriber should not be less than Rs.1 lakh, and in multiples of Rs. 1 lakh thereafter.

Q8. Who among the following cannot issue certificate of deposit?
  1. Scheduled Commercial Banks
  2. Select FIs
  3. Corporates
  4. None of the Above

Answer: (3)
CDs can be issued by (i) scheduled commercial banks {excluding Regional Rural Banks and Local Area Banks}; and (ii) select All-India Financial Institutions (FIs) that have been permitted by RBI to raise short-term resources within the umbrella limit fixed by RBI.

Q9. Who among the following cannot issue commercial papers?
  1. Scheduled Commercial Banks
  2. Corporates
  3. Primary dealers (PDs)
  4. All-India Financial Institutions (FIs)

Answer: (1)
Corporates, primary dealers (PDs) and the All-India Financial Institutions (FIs) are eligible to issue Commercial Paper (CP).

Q10. What is the minimum tangible networth that a corporate must have in order to be eligible to issue commercial paper?  
  1. Rs 1 crore
  2. Rs 2 crore
  3. Rs 3 crore
  4. Rs 4 crore

Answer: (4)
A corporate would be eligible to issue CP provided –
a. the tangible net worth of the company, as per the latest audited balance sheet, is not less than Rs. 4 crore
b. company has been sanctioned working capital limit by bank/s or all-India financial institution/s; and
c. the borrowal account of the company is classified as a Standard Asset by the financing bank/s/ institution/s.

Q11. What is the minimum credit rating of company to be eligible to issue commercial paper? 
  1. A-1
  2. A-2
  3. B-1
  4. B-2

Answer: (2)
The minimum credit rating should be A-2 [As per rating symbol and definition prescribed by Securities and Exchange Board of India (SEBI)]. All eligible participants should obtain the credit rating for issuance of Commercial Paper either from Credit Rating Information Services of India Ltd. (CRISIL) or the Investment Information and Credit Rating Agency of India Ltd. (ICRA) or the Credit Analysis and Research Ltd. (CARE) or the FITCH Ratings India Pvt. Ltd. or such other credit rating agency (CRA) as may be specified by the Reserve Bank of India from time to time, for the purpose.

Q12. The tenor of commercial paper ranges from _____ to _____
  1. 7 days, 1 year
  2. 14 days, 1 year
  3. 1 year, 3 years
  4. 14 days, 3 years

Answer: (1)
Commercial Paper (CP) can be issued for maturities between a minimum of 7 days and a maximum of up to one year from the date of issue.

Q13. What is the minimum amount for which commercial paper can be issued? 
  1. Rs 25,000
  2. Rs 50,000
  3. Rs 1,00,000
  4. Rs 5,00,00

Answer: (4)
CP can be issued in denominations of Rs.5 lakh or multiples thereof.

References

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