050403_En_Əyani_Yekun Dövlət Attestasiyasi testinin sualları Fənn : 050403 Yekun Dövlət Attestasiyası

1. Which one of the following statements related to the internal rate of return (IRR) is correct?

• Financing type projects should be accepted if the IRR exceeds the required return.
√ The IRR is equal to the required return when the net present value is equal to zero.
• The IRR yields the same accept and reject decisions as the net present value method given mutually exclusive projects.
• A project with an IRR equal to the required return would reduce the value of a firm if accepted.
• The average accounting return is a better method of analysis than the IRR from a financial point of view.

You are considering two independent projects with the following cash flows. The required return for both projects is 16 percent. Given
this information, which one of the followingstatements is correct? Year 0- Project A cashflow (-$125000), Project B cashflow (-
2. $135000), Year 1-Project A cashflow ($46000), Project B cashflow ($50000), Year 2-Project A cashflow ($79000), Project B cashflow
($30000), Year 3-Project A cashflow ($51000), Project B cashflow ($110000)

• You should accept Project B and reject Project A based on their respective IRRs.
√ You should accept both projects based on both the NPV and IRR decision rules.
• You should accept Project B and reject Project A based on their respective NPVs.
• You should accept Project A and reject Project B based on their respective NPVs
• You should accept Project A and reject Project B based on their respective IRRs.

An investment has the following cash flows and a required return of 13 percent. Based on IRR, should this project be accepted? Why or
3. why not? Year 0-cashflow is equal to (-$42000), Year 1-cashflow is equal to ($16500), Year 2-cashflow is equal to ($28400), Year 3-
cashflow is equal to ($7500)

• No; The IRR exceeds the required return by about 0.06 percent.
√ Yes; The IRR exceeds the required return by about 0.06 percent.
• Yes; The IRR exceeds the required return by about 0.94 percent.
• Yes; The IRR is less than the required return by about 0.06 percent.
• No; The IRR is less than the required return by about 0.94 percent.

Day Interiors is considering a project with the following cash flows. What is the IRR of this project? Year 0-cashflow is equal to (-
4. $114600), Year 1-cashflow is equal to ($35900), Year 2-cashflow is equal to ($50800), Year 3-cashflow is equal to ($45000)

• 7.48 percent
√ 7.03 percent
• 8.56 percent
• 6.42 percent
• 8.22 percent

The HIJ bond has a current price of $800, a maturity value of $1,000, and matures in 5 years. If interest is paid semi-annually and the
5. bond is priced to yield 8%, what is the bond's annual coupon rate?

• 1.50%
√ 3.068%
• 5.00%
• 7.00%
• 4.00%

Nurlan wants to invest in Bank Standard bond that has a 8% coupon rate (with interest paid semi-annually), a maturity value of $1,000,
6. and matures in 5 years. Bond is priced to yield 6%. If he has 1000,000 then how many bonds Nurlan can buy ?

• 1089
√ 921
• 1000
• 1086
• 935

Twenty years ago, Toshiba Inc issued 30 year bonds with a $1,000 face value and a 6 percent coupon rate, paid semiannually. Bond of
7. this risk currently has a yield to maturity of 8 percent. How much would you expect to pay for one of these bonds today?

• 802
 √ 864
• 1231
• 1200
• 1148

A 10-year Lenova bond with par value of $1,000 has a 6% coupon rate and pays interest every six months. The bond is three years old
8. and has just made its sixth payment. The market now only requires a 4% return on the bond. What is the expected price of the bond?

• 1164
√ 1121
• 1047
• 1040
• 1056

If an investor may have to sell a bond prior to maturity and interest rates have risen since the bond was purchased, the investor is
9. exposed to

• the coupon effect.

√ interest rate risk.
• an indefinite maturity
• none is straight
• a perpetuity

10. Which of the following is not an advantage of investing in bonds?

• Bonds are good sources of current income.

√ Bonds have unlimited profit potential.
• Bondholders receive their payments before shareholders can be compensated.
• none is straight
• Bond investments are relatively safe from large losses.

11. Which of the following statements is false?

• A bond issuer must pay periodic interest.

√ Bond prices remain fixed over time.
• A bond is a financial contract.
• none is straight
• Bonds carry no corporate ownership privileges.

A government bond issued in France has a coupon rate of 5 percent, a face value of 100 euros, and matures in five years. The bond pays
12. annual interest payments. Calculate the price of the bond (in euros) if the yield to maturity is 3.5 percent.

• 100
√ 106.77
• 108.33
• 116.33
• 106.33

Assume that you are interested in purchasing a bond with 5 years to maturity and a 10% coupon rate. If your required return is 12%,
13. what is the highest price that you would be willing to pay?

• 1000
√ 927.90
• 200
• 300
• 985.60

A three-year bond with 10 percent coupon rate and $1,000 face value yields 8 percent. Assuming annual coupon payments, calculate the
14. price of the bond.

• 951.96
 √ 1051.54
• 981.51
• 857.96
• 1000

A government bond issued in France has a coupon rate of 5 percent, a face value of 100 euros, and matures in five years. The bond pays
15. annual interest payments. Calculate the price of the bond (in euros) if the yield to maturity is 3.5 percent

• 100
√ 106.77
• 105
• 92
• 106.33

The market portfolio's historical returns for the past three years were 10 percent, 10 percent, and 16 percent. Suppose the risk-free rate
16. of return is 4 percent. Estimate the market risk premium.

• 4 percent
√ 8 percent
• 16 percent
• non of above
• 12 percent

A firm's cost of equity can be estimated using the

17. I) discounted cash-flow (DCF) approach;

II) capital asset pricing model (CAPM);
III) arbitrage pricing theory

• I and II
√ I, II, and III
• II and III
• non of above
• I and III

18. One calculates the after-tax weighted average cost of capital (WACC) using which of the following formulas?

• WACC = (rD) (D/V) + (rE) (E/V), where V = D + E.

√ WACC = (rD) (1 − TC) (D/V) + (rE) (E/V), where V = D + E.
• WACC = (rD) (D/E) + (rE) (E/D).
• non of above
• WACC = (rD) (1 − TC) (D/V) + (rE) (1 − TC) (E/V), where V = D + E.

19. The company cost of capital, when the firm has both debt and equity financing, is called the

• cost of debt
• non of above
• return on equity (ROE).
√ weighted average cost of capital (WACC)
• cost of equity

The market value of Charter Cruise Company's equity is $15 million and the market value of its debt is $5 million. If the required rate of
20. return on the equity is 20 percent and that on its debt is 8 percent, calculate the company's cost of capital. (Assume no taxes.)

• non of above
• 11 percent
• 20 percent
• 14 percent
√ 17 percent
 If a firm uses the same company cost of capital for evaluating all projects, which situation(s) will likely occur?

21. I) The firm will reject good low-risk projects;

II) The firm will accept poor high-risk projects;
III) The firm will correctly accept projects with average risk

• non of above
• I and II only
• I only
√ I,II, and III
• II only

22. One would expect a stock with a beta of 1.25 to increase in returns

• non of above
• 125 percent more than the market in up markets
• 25 percent more than the market in down markets
• 125 percent more than the market in down markets
√ 25 percent more than the market in up markets

23. One would expect a stock with a beta of zero to have a rate of return equal to

• non of above
• the market rate of return
• zero
• the market risk premium
√ the risk-free rate

Suppose the beta of ExxonMobil is 0.65, the risk-free rate is 4 percent, and the expected market rate of return is 14 percent. Calculate
24. the expected rate of return on ExxonMobil.

• 6.5 percent
• non of above
• 13.1 percent
• 12.6 percent
√ 10.5 percent

Stock X has a standard deviation of return of 10 percent. Stock Y has a standard deviation of return of 20 percent. The correlation
25. coefficient between the two stocks is 0.5. If you invest 60 percent of your funds in stock X and 40 percent in stock Y, what is the
standard deviation of your portfolio?

• 10.3 percent
• 14.8 percent
• non of above
√ 12.2 percent
• 21.0 percent

Stock A has an expected return of 10 percent per year and stock B has an expected return of 20 percent. If 40 percent of a portfolio's
26. funds are invested in stock A and the rest in stock B, what is the expected return on the portfolio of stock A and stock B?

• 14 percent
• 10 percent
• 20 percent
√ 16 percent
• non of above

27. Market risk is also called

• undiversifiable risk.
√ systematic risk and undiversifiable risk
• systematic risk
• non of above
 • firm-specific risk

28. Unique risk is also called

• non of above
• systematic risk
• non-diversifiable risk
√ firm-specific risk
• market risk

29. A statistical measure of the degree to which securities' returns move together is called a

• standard deviation
• geometric average
• non of above
• variance
√ correlation coefficient

Assume the following data: Risk-free rate = 4.0 percent; average risk premium = 7.7 percent. Calculate the required rate of return for the
30. risky asset.

• 5.6 percent
√ 11.7 percent
• 30.8 percent
• non of above
• 7.6 percent

31. If the standard deviation of annual returns is 19.8 percent and the number of years of observation is 107, what is the standard error?

• 4.23 percent
√ 1.91 percent
• 19.8 percent
• non of above
• 0.47 percent

32. Which of the following is an estimate of the standard error of the mean?

• The average annual rate of return divided by the square root of the number of observations
√ The standard deviation of returns divided by the square root of the number of observations
• The variance of returns divided by the square root of the number of observations
• non of above
• The variance divided by the number of observations

33. When Honda develops a new engine, the incidental effects might include the following:

• demand for replacement parts only

√ demand for replacement parts, profits from the sale of repair services, and offer modified or improved versions of the new engine for
other uses
• demand for replacement parts and offer modified or improved versions of the new engine for other uses.
• non of above
• demand for replacement parts and profits from the sale of repair services

25) Given the following data for Project M calculate the NPV of the project.

C0 C1 C2
34. Cash flow in nominal terms: −100 75 60
Real discount rate = 5%
Nominal discount rate = 10%

• 25.85
√ 17.77
• 35
 • non of above
• 22.65

Capital equipment costing $250,000 today has $50,000 salvage value at the end of five years. If the straight-line depreciation method is
35. used, what is the book value of the equipment at the end of two years?

• 200000
√ 170000
• 150000
• non of above
• 140000

A piece of capital equipment costing $400,000 today has no (zero) salvage value at the end of five years. If straight-line depreciation is
36. used, what is the book value of the equipment at the end of three years?

• 120000
√ 160000
• 240000
• non of above
• 80000

For project Z, year 5 inventories increase by $6,000; accounts receivable by $4,000; and accounts payable by $3,000. Calculate the
37. increase or decrease in working capital for year 5.

• Decreases by $1,000
• Decreases by $7,000
• non of above
• Increases by $5,000
√ Increases by $7,000

38. Working capital is a frequent source of errors in estimating project cash flows. These errors include

• forgetting about working capital entirely and forgetting that working capital may change during the life of the project
√ forgetting about working capital entirely, forgetting that working capital may change during the life of the project, and forgetting that
working capital is recovered at the end of the project
forgetting about working capital entirely, forgetting that working capital may change during the life of the project, and forgetting to
• depreciate working capital
• non of above
forgetting that working capital may change during the life of the project, forgetting that working capital is recovered at the end of the
• project, and forgetting to depreciate working capital

39. If depreciation is $600,000 and the marginal tax rate is 21 percent, then the tax shield due to depreciation is

• 600000
√ 126000
• The answer cannot be determined from the information given
• non of above
• 390000

40. If depreciation is $100,000 and the marginal tax rate is 21 percent, then the tax shield due to depreciation is

• 100000
√ 21000
• The answer cannot be determined from the information given
• non of above
• 65000

Suppose that a project has a depreciable investment of $600,000 and falls under the following MACRS year 5 class depreciation
schedule:
41. year 1: 20 percent; year 2: 32 percent; year 3: 19.2 percent; year 4: 11.5 percent; year 5: 11.5 percent; and year 6: 5.8 percent.

Calculate depreciation for year 2.

 • 120000
√ 192000
• 115200
• non of above
• 96000

42. Proper treatment of inflation in NPV calculations involves

• discounting nominal cash flows by the nominal discount rate

√ discounting nominal cash flows by the nominal discount rate and discounting real cash flows by the real discount rate
• discounting nominal cash flows by the real discount rate
• non of above
• discounting real cash flows by the real discount rate

The NPV value obtained by discounting nominal cash flows using the nominal discount rate is the same as the NPV value obtained by
43. discounting

• real cash flows using the nominal discount rate only

√ real cash flows using the real discount rate only
• real cash flows using the nominal discount rate and nominal cash flows using the real discount rate
• non of above
• nominal cash flows using the real discount rate only

44. The real rate of interest is 3 percent and inflation is 4 percent. What is the nominal rate of interest?

• 3.00 percent
√ 7.12 percent
• negative 1.00 percent
• non of above
• 1.00 percent

Story Company is investing in a giant crane. It is expected to cost $6 million in initial investment, and it is expected to generate an end-
45. of-year after-tax cash flow of $3 million each year for three years. Calculate the NPV at 12 percent.

√ $1.20 million
• $0.80 million
• $2.40 million
• non of above
• $0.20 million

Muscle Company is investing in a giant crane. It is expected to cost $6.5 million in initial investment, and it is expected to generate an
46. end-of-year cash flow of $3.0 million each year for three years. Calculate the IRR.

• 14.6 percent
√ 18.2 percent
• 22.1 percent
• non of above
• 16.4 percent

47. If the NPV of project A is + $120, that of project B is -$40, and that of project C is + $40, what is the NPV of the combined project?

• 70
√ 120
• -40
• non of above
• 100

48. A project will have only one internal rate of return if

 • the net present value is positive
√ there is a one-sign change in the cash flows
• the cash flows decline over the life of the project
• non of above
• the net present value is negative

Music Company is considering investing in a new project. The project will need an initial investment of $2,400,000 and will generate
49. $1,200,000 (after-tax) cash flows for three years. Calculate the NPV for the project if the cost of capital is 15 percent.

• $169, 935
√ 339870
• 125846
• non of above
• 1200000

50. Project Y has following cash flows: C0 = -800, C1 = +5,000, and C2 = -5,000. Calculate the IRRs for the project.

• 125 percent and 500 percent

√ 25 percent and 400 percent
• No IRRs exist for this project
• non of above
• negative 44 percent and 11.6 percent

51. If the sign of the cash flows for a project changes two times, then the project likely has

• one IRR
√ two IRRs
• four IRRs
• non of above
• three IRRs

52. The following are some of the shortcomings of the IRR method except

• projects can have multiple IRRs

√ IRR is conceptually easy to communicate
• it is very cumbersome to evaluate mutually exclusive projects using the IRR method
• non of above
• IRR cannot distinguish between a borrowing project and a lending project

53. Internal rate of return (IRR) method is also called the

• discounted payback period method

√ discounted cash flow (DCF) rate of return method
• book rate of return method.
• non of above
• modified internal rate of return (MIRR) method

54. Which of the following statements regarding the discounted payback period measure is true?

• The discounted payback measure is better than the NPV rule.

√ The discounted payback measure uses the time value of money concept
• The discounted payback measure exhibits the value additivity property
• non of above
• The discounted payback measure considers all cash flows

55. The payback period rule accepts all projects for which the payback period is

• greater than the cut-off value

√ less than the cut-off value
• an integer
 • non of above
• positive

56. The payback period rule

• varies the cut-off point with the interest rate

√ requires an arbitrary choice of a cut-off point
• varies the cut-off point with the interest rate and requires an arbitrary choice of a cut-off point
• non of above
• determines a cut-off point so that all projects accepted by the NPV rule will be accepted by the payback period rule

Michigan Co. just paid a dividend of $2 per share. Analysts expect future dividends to grow at 20 percent per year for the next four
57. years and then grow at 6 percent per year thereafter. Calculate the expected dividend in year 5.

• 4.15
√ 4.40
• 3.81
• non of above
• 2.95

World-Tour Co. has just now paid a dividend of $2.83 per share (Div0); its dividends are expected to grow at a constant rate of 6
58. percent per year forever. If the required rate of return on the stock is 16 percent, what is the current value of the stock, after paying the
dividend?

• 70
√ 30
• 48
• non of above
• 56

59. The constant dividend growth formula P0 = Div1/(r - g) assumes

• that dividends grow at a constant rate g, forever only.

√ that dividends grow at a constant rate g, forever, and r > g only.
• g is never negative only.
• non of above
• r > g only

CK Company stockholders expect to receive a year-end dividend of $5 per share and then immediately sell their shares for $115 dollars
60. per share. If the required rate of return for the stock is 20 percent, what is the current value of the stock?

• 132
√ 100
• 110
• non of above
• 122

Super Computer Company's stock is selling for $100 per share today. It is expected that–at the end of one year–it will pay a dividend of
61. $6 per share and then be sold for $114 per share. Calculate the expected rate of return for the shareholders.

• 15 percent
√ 20 percent
• 25 percent
• non of above
• 10 percent

If a Wall Street Journal quotation for a company has the values Close = 55.14 and Net change = +1.04, then what was the closing price
62. for the stock for the previous trading day?

• non of above
• 53.02
 √ 54.10
• 55.66
• 56.18

A Wall Street Journal quotation for a company has the following values: Div: $1.12, PE: 18.3, Close: $37.22. Calculate the approximate
63. dividend payout ratio for the company.

• 18 percent
√ 55 percent
• 45 percent
• non of above
• 35 percent

MJ Co. pays out 60 percent of its earnings as dividends. Its return on equity is 15 percent. What is the stable dividend growth rate for
64. the firm?

• 9 percent
√ 6 percent
• 15 percent
• non of above
• 5 percent

65. The valuation of a common stock today primarily depends on

• the number of shares outstanding and the number of its shareholders

√ its expected future dividends and its discount rate
• the price to earnings ratio
• non of above
• Wall Street analysts

66. One can estimate the expected rate of return or the cost of equity capital as follows:

• Dividend yield/expected rate of growth in dividends

• (Dividend yield) × (expected rate of growth in dividends).
• non of above
• Dividend yield - expected rate of growth in dividends
√ Dividend yield + expected rate of growth in dividends

Assume Boeing has about 10.3 billion shares outstanding and the stock price is $37.10. Also, assume the P/E ratio is about 18.3.
67. Calculate the approximate market capitalization for GE.

• $679 billion
√ $382 billion
• $103 billion
• non of above
• $188 billion

A bond has a face value of $1,000, a coupon rate of 0 percent, yield to maturity of 9 percent, and 10 years to maturity. This bond's
68. duration is

• 6.7 years
√ 10.0 years
• 9.6 years
• non of above
• 7.5 years

69. A bond with duration of 5.7 years has a yield to maturity of 9 percent. The bond's volatility (modified duration) is

• 1.9 percent
√ 5.2 percent
• 9.0 percent
 • non of above
• 5.7 percent

70. If a bond's volatility is 5.0 percent and its yield to maturity changes by 0.5 percent (points), then the price of the bond

• changes by 5.0 percent

√ changes by 2.5 percent
• will not change
• non of above
• changes by 7.5 percent

Mr. X invests $1,000 at a 10 percent nominal rate for one year. If the inflation rate is 4 percent, what is the real value of the investment
71. at the end of one year?

• 1100
√ 1058
• 1040
• non of above
• 1000

A three-year bond has an 8.0 percent coupon rate and a $1,000 face value. If the yield to maturity on the bond is 10 percent, calculate
72. the price of the bond assuming that the bond makes semiannual coupon payments.

• 857.96
√ 949.24
• 1000
• non of above
• 1057.54

73. A five-year treasury bond with a coupon rate of 8 percent has a face value of $1,000. What is the semiannual interest payment?

• 80
√ 40
• 50
• non of above
• 100

For $10,000, you can purchase a five-year annuity that will pay $2,504.57 per year for five years. The payments occur at the end of each
74. year. Calculate the effective annual interest rate implied by this arrangement.

• non of above
• 10 percent
√ 8 percent
• 11 percent
• 9 percent

75. An investment having a 10.47 percent effective annual rate (EAR) has what APR? (Assume monthly compounding.)

• 10.99 percent
√ 10.00 percent
• 8.87 percent
• non of above
• 9.57 percent

76. What is the present value of a $1,000 per year annuity for five years at an interest rate of 12 percent?

• 6352.85
√ 3604.78
• 2743.28
• non of above
 • 567.43

77. An investment at 10 percent compounded continuously has an equivalent annual rate of:

• 10.250 percent
√ 10.517 percent
• 10.257 percent
• non of above
• 10.381 percent

78. If the present value annuity factor at 10 percent for 10 years is 6.1446, what is the equivalent future value annuity factor?

• 3.108
√ 15.938
• 8.413
• non of above
• 2.594

79. What is the six-year present value annuity factor at an interest rate of 9 percent?

• 7.523
√ 4.486
• 3.143
• non of above
• 1.677

You would like to have enough money saved to receive an $80,000 per year perpetuity after retirement. How much would you need to
80. have saved in your retirement fund to achieve this goal? (Assume that the perpetuity payments start on the day of your retirement. The
annual interest rate is 10 percent.)

• 1500000
√ 880000
• 80000
• non of above
• 800000

81. An annuity is defined as a set of:

• equal cash flows occurring at equal intervals of time forever

• non of above
• unequal cash flows occurring at equal intervals of time for a specified period
√ equal cash flows occurring at equal intervals of time for a specified period
• unequal cash flows occurring at equal intervals of time forever

You just inherited a trust that will pay you $100,000 per year in perpetuity. However, the first payment will not occur for exactly four
82. more years. Assuming an 8 percent annual interest rate, what is the value of this trust?

• 918787
• non of above
• 1250000
√ 992290
• 1000000

Ms. Colonial has just taken out a $150,000 mortgage at an interest rate of 6 percent per year. If the mortgage calls for equal monthly
83. payments for 20 years, what is the amount of each payment? (Assume monthly compounding or discounting.)

• 1254.70
• non of above
• 1263.06
√ 1074.65
• 1625
 Mr. Hopper expects to retire in 30 years, and he wishes to accumulate $1,000,000 in his retirement fund by that time. If the interest rate
84. is 12 percent per year, how much should Mr. Hopper put into his retirement fund at the end of each year in order to achieve this goal?

• 12483.17
• non of above
• 8287.32
• 4000
√ 4143.66

Mr. Hopper expects to retire in 25 years, and he wishes to accumulate $750,000 in his retirement fund by that time. If the interest rate is
85. 10 percent per year, how much should Mr. Hopper put into his retirement fund each year in order to achieve this goal? (Assume that he
makes payments at the end of each year.)

• 4559.44
• non of above
• 8418.29
√ 7626.05
• 2500

After retirement, you expect to live for 25 years. You would like to have $75,000 income each year. How much should you have saved
86. in your retirement account to receive this income if the annual interest rate is 9 percent per year? (Assume that the payments start one
year after your retirement.)

• 83431.17
• 1213487.12
√ 736693.47
• 1875000
• non of above

87. Which of the following statements is true?

• non of above
• Ending balances using simple interest are always greater than ending balances using compound interest at positive interest rates.
• The present value of an annuity due is always less than the present value of an equivalent ordinary annuity at positive interest rates.
√ The process of discounting is the inverse of the process of compounding.
• The future value of an annuity due is always less than the present value of an equivalent ordinary annuity at positive interest rates.

For $10,000, you can purchase a five-year annuity that will pay $2,358.65 per year for five years. The payments occur at the beginning
88. of each year. Calculate the effective annual interest rate implied by this arrangement.

• 8 percent
√ 9 percent
• 11 percent
• non of above
• 10 percent

If the present value annuity factor is 3.8896, what is the present value annuity factor for an equivalent annuity due if the interest rate is 9
89. percent?

• 3.568
√ 4.24
• 5.313
• non of above
• 3.89

If the present value annuity factor for 10 years at 10 percent interest rate is 6.1446, what is the present value annuity factor for an
90. equivalent annuity due?

• 6.145
√ 6.759
• 5.732
 • non of above
• 7.38

91. What is the eight-year present value annuity factor at a discount rate of 11 percent?

• 5.712
√ 5.146
• 6.916
• non of above
• 11.859

If the three-year present value annuity factor is 2.673 and the two-year present value annuity factor is 1.833, what is the present value of
92. $1 received at the end of the three years?

• 1.19
√ 0.84
• 0.92
• non of above
• 0.89

93. The one-year discount factor, at an interest rate of 100 percent per year, is:

• 1.50.
√ 0.50.
• 1.00.
• non of above
• 0.25.

94. The net present value formula for one period is:

• NPV = PV required investment.

√ NPV = C0 + [C1/(1 + r)].
• NPV = C1/C0.
• non of above
• NPV = C0/C1.

95. The present value formula for a cash flow expected one period from now is:

• PV = C1 × (1 + r).
√ PV = C1/(1 + r).
• PV = (1 + r)/C1.
• non of above
• PV = C1/r.

96. If the present value of $600, expected one year from today, is $400, what is the one-year discount rate?

• 15 percent
√ 50 percent
• 25 percent
• non of above
• 20 percent

97. If the present value of $250 expected one year from today is $200, what is the one-year discount rate?

• 10 percent
√ 25 percent
• 30 percent
• non of above
• 20 percent
98. If the present value annuity factor at 8 percent for 10 years is 6.71, what is the equivalent future value annuity factor?

• 3.108
√ 14.486
• 5.384
• non of above
• 2.159

If the present value of $1 received n years from today at an interest rate of r is 0.3855, then what is the future value of $1 invested today
99. at an interest rate of r percent for n years?

• 1.385
√ 2.594
• Not enough information is given to solve the problem.
• non of above
• 1.701

John House has taken a 20-year, $250,000 mortgage on his house at an interest rate of 6 percent per year. What is the remaining balance
100. (or value) of the mortgage after the payment of the fifth annual installment?

• 128958.41
√ 211689.53
• 248719.21
• non of above
• 141019.50

After retirement, you expect to live for 25 years. You would like to have $75,000 income each year. How much should you have saved
101. in your retirement account to receive this income, if the annual interest rate is 9 percent per year? (Assume that the payments start on the
day of your retirement.)

• 736693.47
√ 802995.88
• 1427831.93
• non of above
• 2043750.21

102. If the one-year discount factor is 0.8333, what is the discount rate (interest rate) per year?

• 10 percent
√ 20 percent
• 40 percent
• non of above
• 30 percent

103. The one-year discount factor, at a discount rate of 25 percent per year, is:

• 1.25.
√ 0.8.
• 0.75.
• non of above
• 1.0.

104. The present value of $121,000 expected one year from today at an interest rate (discount rate) of 10 percent per year is:

• 121000
√ 110000
• 108900
• non of above
• 100000
 If the present value of cash flow X is $240, and the present value of cash flow Y is $160, then the present value of the combined cash
105. flows is:

• 240
√ 400
• 80
• non of above
• 160

106. If the annual interest rate is 12 percent, what is the two-year discount factor?

• 0.893
√ 0.797
• 0.806
• non of above
• 1.254

107. Present value is defined as:

• inverse of future cash flows

√ future cash flows discounted to the present by an appropriate discount rate
• future cash flows multiplied by the factor (1 + r)t.
• non of above
• present cash flows compounded into the future

108. The present value of $100 expected two years from today at a discount rate of 6 percent is

• $112.36.
√ $89.00.
• $100.00.
• non of above
• $106.00.

109. Costs associated with the conflicts of interest between the managers and the shareholders of a corporation are called:

• administrative costs
√ agency costs
• legal costs.
• non of above
• bankruptcy costs

110. In the principal-agent framework:

• shareholders are the principals.

√ shareholders are the principals and managers are the agents.
• managers are the agents.
• non of above
• managers are the principals.

111. Which of the following is an important function of financial markets?

• providing information
• providing financing
• providing financing and liquidity
√ providing financing, providing liquidity, reducing risk, and providing information
• non of above

Ms. Anderson has $60,000 income this year and $40,000 next year. The market interest rate is 10 percent per year. Suppose Ms.
112. Anderson consumes $80,000 this year. What will be her consumption next year?
 • 30000
√ 18000
• 70000
• non of above
• 60000

Mr. Dell has $100 income this year and zero income next year. The expected return from investing in the stock market is 10 percent a
113. year. Mr. Dell also has an investment opportunity—having the same risk as the market in which he can invest $50 this year and receive
$80 next year. Suppose Mr. Dell consumes $50 this year and invests in the project. What is the NPV of the investment opportunity?

• 5
√ 22.73
• 3
• non of above
• 0

114. The following are examples of tangible assets except:

• machinery only
√ training courses for employees only
• machinery, office buildings, and warehouses only
• non of above
• machinery and office buildings only

115. Which of the following groups are referred to as stakeholders?

√ employees, customers, shareholders, and suppliers

• non of above
• employees and customers only
• shareholders only
• employees, customers, and suppliers only

116. A corporation may incur agency costs because:

• non of above
• Managers may not attempt to maximize the value of the firm to shareholders.
√ All of the responses are correct.
• Shareholders incur monitoring costs
• Of the separation of ownership and management.

Ms. Venus has $100 income this year and $110 next year. The market interest rate is 10 percent per year. Suppose Ms. Venus consumes
117. $60 this year. What will be her consumption next year?

• 210
• non of above
• 120
• 170
√ 154

Mr. Bird has $100 income this year and zero income next year. The market interest rate is 10 percent per year. Mr. Bird also has an
118. investment opportunity in which he can invest $50 today and receive $80 next year. Suppose Mr. Bird consumes $30 this year and
invests in the project. What will be his consumption next year?

• 100
• non of above
• 80
• 82
√ 102

Mr. Free has $100 income this year and zero income next year. The market interest rate is 10 percent per year. If Mr. Free consumes $30
119. this year and invests the rest in the market, what will be his consumption next year?
 • 50
√ 77
• 100
• non of above
• 55

120. Which of the following statements about the relationship between interest rates and bond prices is true?

There is an inverse relationship between bond prices and interest rates, and the price of short-term bonds fluctuates more than the price
• of long-term bonds for a given change in interest rates (assuming that the coupon rate is the same for both).
√ There is an inverse relationship between bond prices and interest rates, and the price of long-term bonds fluctuates more than the price
of short-term bonds for a given change in interest rates (assuming that the coupon rate is the same for both).
There is a direct relationship between bond prices and interest rates, and the price of long-term bonds fluctuates more than the price of
• short-term bonds for a given change in interest rates (assuming that the coupon rate is the same for both).
• non of above
There is a direct relationship between bond prices and interest rates, and the price of short-term bonds fluctuates more than the price of
• long-term bonds for a given change in interest rates (assuming that the coupon rate is the same for both).

In this transaction, the borrower enters into a single credit agreement with a group of lenders covering all of the loan facilities provided
to the borrower by the lenders. Transaction agreement might take the place of multiple bilateral credit agreements between the borrower
121. and each lender or be used in lieu of a participation because all of the lenders are in privity with the borrower. The explanation is
related to:

• letter of credit
• integrated loans
• participation loans
• factoring
√ syndicated loans

122. The main theories describing the motives for overseas expansion relate to:

factor price differentials; trade barriers; high arbitrage; high price and trade opportunity; technological advantage; investment
• opportunity
• low cost, high arbitrage; high price and trade opportunity; ownership disadvantage; high managerial skills; investment opportunity;
diversification of income; economic environment; demographic advantage; consumer differentiation; attract more capital; technological
• advantage
√ factor price differentials; trade barriers; arbitrage and the cost of capital; ownership advantages; diversification of earnings; excess
managerial capacity;
diversification of income; economic environment; ownership disadvantage; high managerial skills; diversification of earnings; excess
• managerial capacity;

123. What is a multinational banking?

• It states that the investment decisions of banks stem from a conscious effort by managers to diversify earnings and therefore reduce risk.
This means that in many areas of business it may be difficult to undertake cross-border activity without a physical presence within a
• country.
√ It refers to banks having some element of ownership and control of banking operations outside their home market.
It means that in many areas of business (and particularly in banking) it may be difficult to undertake cross-border activity without a
• physical presence within a country.
• It suggests that overseas activity occurs so that firms can take advantage of international factor price differences.

The main role of _________is to help companies and governments raise funds in the capital market, either through the issue of stock
124. (otherwise referred to as equity or shares) or debt (bonds).

• credit unions
• saving banks
√ investment banks
• commercial banks
• co-operative banks

These are similar to savings and co-operative banks as they have mutual ownership and focus primarily on retail deposit taking and
125. mortgage lending is called:
 • Co-operative banks
• Credit union
• Corporate banking
√ Building society
• Private banking

__________are the major financial intermediary in any economy. They are the main providers of credit to the household and corporate
126. sector and operate the payments mechanism. ___________ are typically joint stock companies and may be either publicly listed on the
stock exchange or privately owne

• Credit union
• Co-operative banks
• Saving banks
√ Commercial banks
• Building Society

_____________business consisted of taking deposits and making loans and the majority of their income was derived from lending
127. business.

• Modern banking
• Investment banking
• International banking
√ Traditional banking
• Classic banking

128. Which of the following is not non-deposit-taking institutions (NDTIs)?

• pensions funds
• leasing companies
• unit trusts
√ co-operative bank
• investment bank

__________ play a major role in a country's economy because deposit obligations make up a large portion of a country's ___________
129. and are therefore highly relevant to governments and central banks for the transmission of monetary policy.

• Financial institutions; financial market

• Central bank; financial institutions
• Monetary financial institutions; central bank
√ Monetary financial institutions; money supply
• Money supply; financial market

The problem created by asymmetric information before the transaction occurs is called ________, while the problem created after the
130. transaction occurs is called_________

• free-riding; costly state verification

• moral hazard; adverse selection
• costly state verification; free-riding
√ adverse selection; moral hazard
moral hazard; free-riding
•

131. Which of them is not a direct financial participant.

• Financial markets
• Savers/depositors
• Asset securitizations
• Borrowers
√ Financial intermediaries

132. What is the main role of financial intermediaries in an economy?

 • Control cash flows in circulation and make more profit from transaction.
• Lend money to people only through its own capital
• Help to move funds from parties with missing capital to parties needing funds.
• Refers only to the collection of money from peopl
√ Provide a mechanism by which funds are transferred and allocated to their most productive opportunities.

Marketing Map should consider the following question:

1. Who are my best customers and how can I keep them?
133. 2. Where is the greatest market potential to find new customers?
3. What locations should I choose to expand our branch network?
4. Is our network of bank branches optimized for maximum performance?

√ All of the above

• 1, 2, 4
• 2, 3, 4
• 1 and 2
• 2 and 4

134. Which one of the following describes the role of marketing in banks?

• B and C
√ All of the above
It can provide better resolution determining types of products and services that banks provide to the market’s needs through activities
• such as gathering information, researching customers’ demands
Marketing contributes greatly to improve the quality of products and services, create prestigious image, and increase the
• competitiveness of banks
• It helps banks to dissolve the harmonious relationship between customer benefits, employees and banks

Alfa Corporation Manager is thinking about investing in the Capital Bank. He is examining certain ratios of the bank including the ratio
135. of the book value of the assets to the market value of the assets and the market value of the bonds held by the bank to their recorded
value. What type of risk is Alfa Corporation attempting to measure with these ratios?

• Solvency risk
• Interest rate risk
√ Market risk
• Liquidity risk
• Credit risk

136. Which one of the following best describe the Performance?

• Must be directed towards specific objectives

• How adequately a financial firm meets the needs of its stockholders, employees, depositors and other creditors and borrowing customers
• Keep regulators satisfied that operating policies, loans and investments are sound
√ All of the above
• None of the above

International Bank of Azerbaijan has the following information:

Net profit margin – 12.5%
Net Income – USD 1000
137. Total asset – USD 62,500
Total equity capital - USD 6,250
What is this bank’s total operating income?

• None of the above

• USD 31,250
√ USD 8,000
• USD 488.281
• USD 125

138. The financial statement that shows the financial position of a bank at a particular point in time is the:

• Statement of changes in equity

 • Income statement
• Cash flow statement
√ Balance sheet
• Explanatory notes to the financial statements

The International Bank of Azerbaijan has an ROE of 17.5%, an asset utilization ratio of 13% and a net profit margin of 9%. What must
139. this bank's ROA?

• None of the above

• 1.58 times
• 14.96 times
√ 1.17 times
• 134.2 times

The International Bank of Azerbaijan has an ROE of 17.5%, an asset utilization ratio of 13% and a net profit margin of 9%. What must
140. this bank's equity multiplier be?

• None of the above

• 1.58 times
• 1.17 times
√ 14.96 times
• 134.62 times

141. A ratio that can be used to measure a bank's credit risk would be:

• Interest on real estate loans/ total real estate loans

• Total assets/number of full time employees
√ Nonperforming loans/total loans
• Interest sensitive assets/interest sensitive liabilities
• Net loans/total assets

142. A ratio that can be used to measure a bank's credit risk would be:

• It has a small amount of financial leverage

√ It is doing a poor job of controlling expenses
• It has assets that are not very productive
• None of the above
• It has a small amount of liquidity risk

Using the information listed below for IST Bank, what is this bank's ROA?
Net income – USD 55 million
143. Total Operating Income – USD 650 million
Total asset – USD 4,055 million
Total equity capital - USD 350 million

• 8.46%
√ 1.36%
• 15.71%
• None of the above
• 16.03%

Using the information listed below for IST Bank, what is this bank's net profit margin?

Net income – USD 55 million

144. Total Operating Income – USD 650 million
Total asset – USD 4,055 million
Total equity capital - USD 350 million

• 16.03%
√ 8.46%
• 1.36%
• None of the above
• 15.71%
 Suppose that a bank has equity of $1.5 million, interest expense of $0.1 million, Provision = $50 thousand, net noninterest income of -
145. $0.150 million. and a tax rate of 25%. What is the minimum total interest income required to give a ROE of 12%?

• $0.525 million
√ $0.540 million
• $0.440 million
• $0.420 million
• $0.490 million

146. Which one of the following is not determinants of bank failure?

• Managerial problems
√ None of the above
• Role of regulatory
• Poor asset management
• Fraud

147. During the failed bank resolution strategy, when the bank is liquidated, who will not lose?

• Creditors
√ Taxpayers
• Managers
• Employees
• Shareholders

148. Which one is not under the three pillars of BASEL III norms in banking industry?

• Market Discipline
√ Risk oriented Supervision
• Supervisory Review Process
• All of the above
• Minimum Capital Requirement

149. Contagion theory is:

• The rapid contraction of investment spending that occurs when interest rates are increased by the Central Bank
√ Healthy banks become the target of runs, because depositors and investors, in the absence of information to distinguish between healthy
and unhealthy banks, rush to liquidity.
Depositors will rush to the bank to withdraw their deposits and the bank under normal situations would not have sufficient liquid assets
• on hand
• Many small investors cannot adequately judge the soundness of their bank
• The phenomenon that if one bank loan defaults it will cause other bank loans to default

150. Asset/liability mismatch is:

• The value of liabilities exceeds the value of assets

√ floating rate liability financing a fixed rate loan
• Inability to pay liability when comes due
• None of the above
• The value of assets exceeds the value of liabilities

151. Which one of the following is NOT the reason for bank failure?

• Bad loans
√ Increasing deposit borrowing
• Funding issues
• Rogue employees
• Asset/liability mismatch
152. A bank failure occurs when:

• Customers will not want to obtain loans from this bank

√ A bank is unable to meet its obligations to its depositors or other creditors because it has become insolvent or too illiquid
• People to not want to deposit in this bank
• None of the above
• The quality of a bank's assets changes almost daily

According to the regulation of Central Bank of Azerbaijan, exposure to related parties of banks and persons acting on their behalf could
153. not exceed:

• C and B
• for individuals, 3 percent of the bank's total capital
√ B and A
• for legal entities, 20 percent of the bank's total capital
• for legal entities, 10 percent of the bank's total capital

154. According to BASEL II, Pillar 2 addresses:

• risks not fully considered by Pillar 1 (e.g. credit concentration risk)

√ All of the above
• factors external to the bank (e.g. business cycle effects) Principles of the supervisory review process
• Evaluation of internal capital assessment process
• risks not considered at all by Pillar 1 (e.g. interest rate risk in the banking book)

155. The main Shortcomings of BASEL I is:

Failed to provide banks with appropriate incentives to use credit mitigation techniques and did not recognize credit mitigation
• techniques (collateral)
√ All of the above
• Crude, arbitrary grid of risk weights not reflecting the actual risk
• Only B and C
• High risk loans and low risk loans carry the same credit rating as the grid is determined by the issuer, not the quality of the issuer

156. Banks in Azerbaijan are regulated by the:

• Constitution of the Republic of Azerbaijan

√ All of the above
• Civil Code of the Republic of Azerbaijan
• Laws of the Republic of Azerbaijan on the Central Bank
• Law on Banks

157. How regulators monitor banks (to be sure they operate prudently)?

• Regulators meet with the Board of Director of the banks and make discussions
√ Regulators examine banks via using CAMELS rating
• Regulators take information from Tax Department about each bank’s tax payment made correctly or not
• None of the above
• Regulators analysis financial statements of banks

158. Which one of the following is regulatory tools?

• The lender of last resort

√ All of the Above
• Supervision
• Licensing
• Only A and C

If the risk weight of mortgage loans is 50% and a bank has available regulatory capital of 10 million USD, the maximum amount the
159. bank can lend, under the rules of the Basel II Accord (as mortgages with a 50% risk weight is):
 • 125 million USD
• 20 million USD
√ 250 million USD
• 50 million USD
• 500 million USD

160. A $10 million 10-day VAR figure with 95% confidence means:

• the minimum loss over the next 10 days is expected to be at least $10 million in 95% of the cases.
√ the loss over the next 10 days is expected to be at most $10 million in 95% of the cases.
• the VAR over the next day is $1 million with 95% confidence.
• there is only a 5% chance that we will gain more than $10 million in 10 days
• None of the above

161. For which of the following purposes is a long time horizon advisable when computing the VAR?

√ For capital adequacy purposes

• For portfolio of derivatives with delta changing quickly
• All of the above
• In order to provide a more accurate measurement of the VAR
• For back testing purposes

This statistical method requires the use of some market-based arrays of predetermined risk models to determine how different cases
162. affect the portfolio value is referred as:

√ Scenario analysis
• Stress testing
• All of the above
• Risk matrix analysis
• VAR Calculation method

163. The risk arises from trading of assets because of change in asset prices and exchange rates is classified as:

• Financial risk
• Credit risk
• Assets risk
• Trade risk
√ Market risk

164. Operational risk does not arise from:

√ Defaults by own customers

• People and systems
• External Events
• Inadequate or failed internal processes
• None of the above

165. Which of the following is not a major component of Market Risk?

• Foreign exchange risk

• Equity risk
• Interest rate risk
√ Credit risk
• Commodity risk

Bank has generated USD 400 mln deposit, USD 100 mln other borrowing and USD 100 mln equity capital. Interest costs incurred for
166. deposit USD 40 mln, for other borrowing USD 10 mln, and USD 10 mln for equity capital. And bank used total USD 600 mln of new
generated fund. Find Pooled Fund Raising Expense (in percentage)
 • 14.00%
• 8.3%
• 8.00%
• 6.7%
√ 10.00%

Bank has generated USD 500 mln deposit, USD 100 mln other borrowing and USD 100 mln equity capital. Interest costs incurred for
deposit USD 50 mln, for other borrowing USD 10 mln, and USD 10 mln for equity capital. And bank only used USD 500 mln of new
167. generated fund. Find Pooled Fund Raising Expense (in percentage)

√ 14.00%
• 8.3%
• 10.00%
• 12.00%
• 7.1%

168. Commercial paper is:

• A financing alternative used to purchase commercial entities.

• Accepting cash or money from individuals and businesses (depositors) for safe keeping in a bank account for future use
• Lending against the borrower’s assets.
• Typically supports farming and other agricultural production
√ A short-term, unsecured note usually issued by large and financially strong companies

169. Which one of the following best describes the Character in credit analysis?

• The predictability and sustainability of the cash flows of a company to service debt
• The structure of financing and level of capitalization of a company
• Assets that can be used to back up the loan, if the borrower cannot repay his loan
√ The reputation of a company's management in the company s industry and greater business community
• The economic situation in both the both, country and industry, in which the company is operating

170. The property that you can let the bank keep until the loan is paid off is called:

• Capacity
• Creditworthy
• Capital
• Closed end credit
√ Collateral

171. Financial ability to repay loan with present income is:

• Credit Bureau
• Condition
• Character
• Capital
√ Capacity

172. What are risk involved in payment systems?

• Inflation risk, liquidity risk, credit risk, operational risk

• All of the above
• Interest rate risk, liquidity risk, legal risk
• Interest rate risk, inflation risk, settlement risk, credit risk
√ Credit risk, liquidity risk, settlement risk, legal risk

173. Why are payment systems important?

• Only A and B
 √ All of the above
Payment systems are vital to the operation of financial markets as they are used to settle trading of various financial instruments such as
• government securities, commercial paper, stocks, foreign exchange and derivatives
Allows the customers of one bank to make payments to other banks thereby minimizing the risks of fraud and erroneous payments to
• illegitimate creditors.
• Allows safe and timely completion of transactions

174. Who use the SWIFT

• Banks
• Only A and B
• Trading Houses
√ All of the above
• Brokerage Institutes

175. Which of the following best describes the SWIFT?

• Only A and B
• Only B and C
enables to realize on-line interbank transactions, considerably increase money circulation intensity, and more flexibly manage liquidity
• by banks
way to execute small, however recurring retail payments through e-carriers and integrate governmental entities maintaining payment
• operations
√ It is a messaging network that financial institutions use to securely transmit information and instructions through a standardized system
of codes

176. Services Offered by SWIFT:

• connections enable access to a variety of applications which include real-time instruction matching for treasury and forex transactions
• Compliance services
• Messaging, Connectivity, and Software Solutions
√ All of the above
dashboards and reporting utilities which enable the clients to get a dynamic, real-time view of monitoring the messages, activity, trade
• flow, and reporting

177. When Bank “A” opens bank account in Bank “B”, it is for Bank “A”:

• Current account
• None of the above
• Credit account
√ Nostro account
• Vostro account

178. When Bank “B” opens bank account in Bank “A”, it is for Bank “A”:

• Current account
• None of the above
• Credit account
√ Vostro account
• Nostro account

179. The one of the following plays crucial role in active bank operation:

• All of the above

• Factoring transactions
• Lease transactions
√ Credit activity
• Deposit transactions

In securities markets, there should be a risk-return trade-off with higher-risk assets having _________ expected returns than lower-risk
180. assets:
 • Lower
• Depends on types of asset
• Can’t tell from the information given
√ Higher
• The same

181. Money Market securities characterized by:

• A and B
• Maturity less than one year
• Safety of the principal amount
√ All of the above
• Low rates of return

182. Assume that Central Bank of Azerbaijan make decision to increase required reserve ratio. It would be:

• Implementing contractionary monetary policy to get high level of export

• None of all above
• Implementing contractionary monetary policy to get high level of import
√ Implementing contractionary monetary policy to conduct inflation rate
• Implementing expansionary monetary policy to increase economic growth

183. Which of the following statements are true?

• Printing money, while necessary, is a losing venture for a government

• Too much money printed usually leads to lower prices
• In the modern economy the amount of money printed has no effect on prices
√ Printing money can be a profitable venture for a government
• Printing more money reduces costs in the economy

184. In its role as the bankers' bank, a central bank performs each of the following except:

• Providing loans during times of financial distress

√ Make low and stable inflation
• Managing the payments system
• Overseeing commercial banks and the financial system
• Providing deposit insurance

185. Central banks perform each of the following except:

• issuing currency
√ managing fiscal policy
• serving as the government's bank
• controls the money supply
• controlling the availability of money and credit

186. The main function of a Central Bank can be each of one except:

• The central bank controls the issue of notes and coins

√ The central bank could also deal with the general public to provide funds
• The central banks act as the Government’s bank
• All of the above
• The central bank also acts as the official agent to the government in dealing with all its gold and reserves

Based on only a bank’s customer focuses orientation, banking can be classified into:
I. Retail Banking
187. II. Corporate Banking
III. Universal Banking
IV. Postal Banking

• I and II
 √ I, II and III
• All of the above
• None of the above
• I and IV

188. Retail banking means:

• Collection of large number of dividend/interest warrants

√ Providing personal banking services directly to the consumers
• Credit facilities extended to retail traders
• All of the above
• Credit facilities extended to large corporations

Which of the following are commonly functions of the Central Bank?

I. Conduct of monetary policy
189. II. Lending to the general public
III. Supervision the stock market
IV. Lending to the commercial banks

• 1, 2 and 4
√ 1 and 4
• 1 and 3
• All of the above
• 2 and 4

As far as bank customers are concerned, wholesale customers usually include:

I. Banks
190. II. Institutions
III. The public
IV. Small shops

• I only
√ I and II
• I, III, IV
• All of the above
• II only

191. The ___________is defined as the difference between net liquid assets and unpredictable (or volatile) liabilities.

• liquidity mismatch
√ liquidity gap
• liquidity sensitivity
• none of above
• liquidity empty

192. In measuring and managing a bank’s liquidity exposure, the following techniques may be used except:

• cash flow projections of daily liquidity positions;

√ Interest sensitivity analysis;
• scenario analysis and simulation models;
• liquidity gap analysis;
• cash flow projections of daily liquidity sources;

What is a technique borrowed from bond portfolio management, where duration is defined as a weighted average of the maturities of the
193. individual coupon payments.

• Mature analysis
√ Duration analysis
• Sensitivity analysis
• None of above
• Risk analysis
 The ___________ refers to the difference between interest rate-sensitive assets and interest rate sensitive
194. liabilities over a specific time horizon.

• Mature analysis
√ gap analysis
• Interest rate analysis
• Sensitive analysis
• time analysis

195. There is only one factor that drive expected and unexpected lose on a credit portfolio:

• Borrower high risk

√ Customer default risk
• Interest rate risk
• Exchange fluctuation rate risk
• Depositor withdraw risk

196. _____________ as ‘the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events’.

• market risk
√ operation risk
• credit risk
• country risk
• liquidity risk

It is the risk that the value of investments may decline over a given period simply because of economic changes or other events that
197. affect large portions of the market.

• market risk
√ liquidity risk
• operation risk
• country risk
• credit risk

Which of the following is the risk that exchange rate fluctuations affect the value of a bank’s assets, liabilities and off-balance-sheet
198. activities denominated in foreign currency?

• Interest rate risk

• None of above
• Currency options risk
√ Foreign exchange risk
• Currency swaps risk

199. In ___________counterparties agree to exchange an equivalent amount of two different currencies for a specified time.

• an interest rate swap

√ a currency swap
• an interest rate options
• None of above
• a currency options

_______________ which give their holders the right to buy or sell a specified futures contract, using as futures price the exercise price
200. of the option;

• interest rate options

√ future options
• index options
• all of above
• foreign currency options

201. __________________which offer the right to buy or sell a quantity of foreign currency for a specified amount of domestic currency;
 • interest rate options
√ foreign currency options
• future options
• all of above
• index options

_____________may be purchased that effectively give the right to borrow or to lend (deposit funds) at a specified rate of interest (the
202. striking rate) for an agreed period at a future date, or to purchase/sell currencies at agreed exchange rates at agreed future dates.

• Swap
√ Options
• Futures
• None of above
• Forward

If the contract involves a party making a loss that is greater than the initial margin, further deposits are required on a daily basis from the
203. losing party.

√ Financial futures
• Forward contracts
• Options contracts
• Swap Contract
• None of above

204. Which of the following applies to this feature? “They are not usually intended to result in the delivery of a commodity or currency.”

• Forward contracts
√ Financial futures
• Swap Contract
• None of above
• Options contracts

____________________are contracts involving rights or obligations relating to purchases or sales of underlying real or financial assets
205. (e.g. gold and shares respectively), or relating to payments to be made in respect of movements in indices (e.g. the London FTSE 100).

• Financial contracts
√ Financial derivatives
• Letter of credit
• Debit contracts
• Loan commitments

206. Which of the following is attributed to maximize return in the interbank market and minimise cost of deposits

• Asset Management
√ Liability Management
• Capital Management
• None of above
• OBS Management

207. Which of the following is attributed to maximize return on loans and securities, minimize risks and adequate liquidity?

• Liquidity Management
√ Asset Management
• OBS management
• None of above
• Liability Management

208. What of the following belong to Liability Management?

 the bank must predict with the lowest possible margin of error the daily withdrawals and other payments by customers in order to keep
• enough cash and other liquid assets readily available.
the bank must keep an adequate level of capital to comply with regulatory requirements in order to maintain the appropriate level of
• solvency.
• None of above
• the bank must make sure that its portfolio of assets (mainly loans) includes low-risk assets and that it is well diversified
√ the bank must acquire funds (raise deposits) at the lowest possible cost.

209. What of the following belong to Asset management?

• the bank must acquire funds (raise deposits) at the lowest possible cost.
√ the bank must make sure that its portfolio of assets (mainly loans) includes low-risk assets and that it is well diversified
the bank must keep an adequate level of capital to comply with regulatory requirements in order to maintain the appropriate level of
• solvency.
• None of above
the bank must predict with the lowest possible margin of error the daily withdrawals and other payments by customers in order to keep
• enough cash and other liquid assets readily available.

210. Which of the following to measures the net interest income relative to the bank’s total, average or earning assets?

• ROE
√ NIM
• ROA
• C/I
• EPS

______is calculated as net income/total assets (or alternatively average assets over two financial years); this ratio indicates how much
211. net income is generated per £ of assets.

• ROE
√ ROA
• EM
• C/I
• EPS

In general, the primary function of _________is to reduce the risk of failure by providing protection against operating and any other
212. losses.

• Capital
• Investment
• Profit
• Liability
√ Assets

213. ___________which are gross amounts payable that have not yet been paid or credited to accounts.

• System amounts payable

√ Accrued amounts payable
• Net payable
• None of above
• Account payable

Liabilities under ______________comprise cash receipts arising from the sale of securities or other assets that the bank has sold
214. temporarily with a commitment to repurchase.

• Acceptances granted
√ Sale and repurchase agreements
• Bank assurance
• Letter of Credit
• Bank’s Acceptance
 _______________is a financial statement of the wealth of a business or other organization on a given date. This is usually at the end of
215. the financial year.

• Financial Report
√ The balance sheet
• Cash-flow statement
• None of above
• Income Statement

216. Bank-level, or micro-prudential, regulation, which will help raise the resilience of individual banking institutions to periods of stress;

√ The reforms target of Basel 3

• The reforms target of Pillar 1
• The reforms target of Basel 2
• The reforms target of Basel 2
• The reforms target of Pillar 2

_____________restrict the build-up of leverage in the banking sector to avoid destabilising deleveraging processes that can damage the
217. broader financial system and the economy;

• Liquidity ratio
√ Leverage ratio
• Current ratio
• None of above
• Capital ratio

The introduction of liquidity ratios is one of the main innovations of __________. Specifically, the new regulations propose a liquidity
218. coverage ratio and a net stable funding ratio

• Basel 1
√ Basel 3
• Pillar 1
• Pillar 3
• Basel 2

219. The main element of the Basel III capital framework are:

• a capital surplus buffer

√ a capital conservation buffer;
• Investment risk buffer
• None of above
• additional reserve for loan loses

____________ identifies the roles of the national supervisors to ensure banks use appropriate methodology to determine capital
220. adequacy ratios and have a strategy to maintain such ratios.

• Pillar 2 of Basel 1
√ Pillar 2 of Basel 2
• Pillar 3 of Basel 1
• None of above
• Pillar 3 of Basel 2

221. ___________seeks to enhance effective market discipline by introducing high disclosure standards with regard to bank capital.

• The third pillar of Basel 1

√ The third pillar of Basel 2
• The second pillar of Basel 1
• None of above
• The second pillar of Basel 2
 ________________established an international standard around a capital ratio of 8 per cent and focused on risks associated with lending
222. (credit risks), thereby ignoring other types of risk.

• Basel 2 Capital Accord

√ Basel 1 Capital Accord
• Basel 4 Capital Accord
• None of above
• Basel 3 Capital Accord

223. ______________ ratios are a measure of the amount of a bank’s capital expressed as a percentage of its risk-weighted credit exposures

• Financial adequacy
√ Capital adequacy
• Investment adequacy
• Debt adequacy
• Liquidity adequacy

Regulation can create problems of______________ that is, the regulatory process can be ‘holded’ by producers (in this case by banks
224. and other financial institutions) and used in their own interest rather than in the interests of consumers.

• Insurance regulation
√ Agency capture
• Financing source
• Debt financing
• Agency system

225. The gross profit margin is unchanged, but the net profit margin declined over the same perio This could have happened if

• cost of goods sold increased relative to sales.

√ the government increased the tax rat
• dividends were decrease
• All of the above
• sales increased relative to expenses.

226. Which of the following statements (in general) is correct?

• A low receivables turnover is desirabl

√ The lower the total debt-to-equity ratio, the lower the financial risk for a firm.
• The higher the tax rate for a firm, the lower the interest coverage ratio.
• All of the above
• An increase in net profit margin with no change in sales or assets means a poor ROI.

Who selects, releases and concludes agreements with the executive bodies of the bank, except for the administrators, to determine and
227. approve their job instructions?

• Audit Committee
√ Management board
• Senior Managements
• All of above
• Shareholders

228. Except for one of the following can be attributed to the Board of Directors?

• They shall consist of at least 3 members and one single vot

√ To adopt, amend and change the Bank's Internal Regulations;
When the Bank is reorganized, they are elected by a meeting of at least 75% of the General Meeting of Shareholders, with a majority of
• 75% of the votes.
• participate in the development of the bank's strategy;
• Their members are appointed by the General Meeting of Shareholders for a period of not more than 3 years.
 Determine the Bank's policy on interest rates, asset allocation and categories, as well as general financial, accounting, administrative and
229. human resources policies of the bank;

• Senior Managements
√ Supervisory Board
• Shareholders
• Board of Directors
• Audit Committee

Members of _____________are individuals appointed by the general meeting of the bank's shareholders for a period not exceeding 3
230. years from the shareholders and / or outsiders.

• Management Departments
√ the Supervisory Board
• Audit Committee
• Shareholders
• Senior Managers

They should assist in the implementation of the bank's objectives if credit and investment policies implemented by the bank change the
231. credit deman That applies to:

• Operation departments
√ Supervisory Board
• Board of Directors
• Senior Management
• Credit Committee

232. Which of the following represents the largest source of funds for banks?

• borrowings
√ nontransaction deposits
• equity
• all of above
• equity

233. Which of the following is a transaction deposit?

• certificates of deposit
√ NOW account
• negotiable certificates of deposit
• none of above
• passbook savings

234. Which of the following is NOT a source of funds used by banks commonly for only a few days to resolve temporary imbalances?

• Repurchase agreements.
√ Term loans
• Federal funds purchased
• Borrowing at the Federal Reserve banks.
• Eurodollar borrowing

______________ regularly meets eight times each year in Washington, D At each scheduled meeting, the committee reviews economic
235. and financial conditions and decides on the monetary policy to be carried out to meet its long-term goals of price stability and
sustainable economic growth.

• The Federal Reserve Banks

√ Federal Open Market Committee
• Federal Financial Market Authority
• Monetary System Control Committee
• Federal Advisory Council;
236. Which of following is not directly a subsidiary of the Bank of England?

• Financial Policy Committee (FPC),

√ The Financial Conduct Authority
• The Prudential Regulation Authority (PRA)
• None of above
• Monetary Policy Committee

237. Which of the following is NOT likely to be a goal of a central bank?

• maintaining a low inflation rate

√ encouraging the use of paper currency for more profit
• encouraging economic growth
maintaining a stable financial system
•
• Maintaining price stability

238. Money supply operating instrument

• to improve people's living standards and generate more income by bringing more money into the economy.
measures of overall economic performance, such as GDP growth, that are used to assess the impact or effectiveness of economic
• policies.
√ is an instrument to control the growth of some measure of the money supply.
are economic variables that are only indirectly under the control of a policymaker and that the policymaker analyses to determine
• whether a particular policy is having the anticipated effects on the economy as a whol
• is the policy tools used by a central bank to achieve specific monetary policy targets.

239. Meaning of Correspondent banking could be explained as:

It can perform all the functions that are allowed by the banking authorities of the host country, namely taking loans and making
• deposits, as well as selling other types of products and services
It is a separate legal entity from the parent bank, has its own capital and is organized and regulated according to the laws of the host
• country.
It is usually small and they cannot provide banking business – that is, they cannot take any transaction as deposits or making loans and
• used to prospect for new business and they usually act simply as marketing offices for parent banks
This simply involves using a bank located in the overseas market to provide services to a foreign bank. Typically, this kind of banks
√ would be used by other ones to do business in markets where they have no physical presence and as such these types of services are
widely used by smaller banks
It is similar to branches in that they form an integral part of the parent bank and lie somewhere between branches and representative
• offices as they can do less than the former and more than the latter.

240. What is forfaiting transaction in international trading activity?

This a legal banking agreement that allows importers to offer secure terms to exporters and from a bank guarantees the seller that, if
• various documents are presented, the bank will pay the seller the amount du
This is one for which the arrangers guarantee the entire commitment and then syndicate the loan to other banks and institutional
• investors
Such an agreement offers security to the seller, as it is an assurance of payment from an international bank, on the condition that the
• terms of the letter of credit are complied with.
√ It refer to the exporter agrees to surrender the rights to claim for payment of goods or services delivered to an importer under a contract
of sale, in return for a cash payment from a bank.
It is a general term used to cover a variety of commercial mechanisms for reciprocal trade and used probably the oldest and best-known
• example; however, other techniques such as switch-trading, buy-back, counter-purchase and offset have develope

The Economist publishes annually the “Big Mac Index“ by which they compare the prices of the McDonald’s Corporation’s Big Mac
hamburger around the world. The index estimates the exchange rates for currencies based on the assumption that the burgers in question
241. are the same across the world and therefore, the price should be the same. If a Big Mac costs $2.54 in the United States and 294 yen in
Japan? What is the estimated exchange rate of yean per dollar as hypothesized by the Hamburger index?

• $0.0086/Yen
• $0.0081/Yen
√ 115.75 Yen/$
• 124 Yen/$
• Not enough information to determine
242. A BRL/MXN spot rate is listed by a dealer at 0.1378. the 6-month forward rate is 0.14193. the 6-month forward points are closest to:

• -41.30
• None of the above is correct
• -299.70
√ 41.30
• 299.70

One year ago the spot rate of U.S. dollars for Canadian dollars was $1/C$1. Since that time the rate of inflation in the U.S. has been 4%
243. greater than that in Canada. Based on the theory of Relative PPP, the current spot exchange rate of U.S. dollars for Canadian dollars
should be approximately:

• $1/C$
• $0.96/C$
• None of the above
• Relative PPP provides no guide for this type of question
√ $1.04/C$

Other things equal, and assuming efficient markets, if a Honda Accord costs $24,682 in the U.S., then at an exchange rate of $1.57/£,
244. the Honda Accord should cost ________ in Great Britain.

• £24,682
• None of the above
√ £15,721
• £38,751
• £10,759

Today’s settlement price on a Chicago Mercantile Exchange 9CME) Yen futures contract is $0.008011/Yen. Your margin account
currently has a balance of $2,000. The next three days; settlement prices are $0.008057/Yen, $0.007996/Yen, and $0.007985/Yen.
245. (The contractual size of one CME Yen contract is 12,500,000 Yen). If you have a short position in one futures contract, the changes in
the margin account from daily marking-to-market will result in the balance of the margin account after the third day to be

• 1000
• 2000
• 1425
√ 2325
• 3425

Yesterday you entered into a futures contract to sell 62,500 EUR at 1.20$. Your initial performance bond is $1,500 and your
246. maintenance level is $500. At what settle price will you get a demand for additional funds to be posted?

• $1.1840 per EUR

• None of the above
• $1.208 per EUR
• $1.1920 per EUR
√ $1.260 per EUR

An exchange rate between two currencies has increased to 1.4500. If the base currency has appreciated by 8% against the price
247. currency, the initial exchange rate between the two currencies was closest to:

• 1.484
• None of the above is correct
• 1.334
• 1.566
√ 1.343

If the Indian subsidiary of a US firm has net exposed assets of Rp9,000,000 and the Indian rupee drops in value from Rp45.00/$ to
248. Rp50.00/$, the US firm has a translation:

• Loss of $25,000
• Gain of $20,000
 • Gain of $25,000
√ Loss of $20,000
• Gain of Rp25,000

The following exchange rates are available: ¥64.00 = SF1, SF1.6000 = $1 and, ¥105.00 = $1. You have $100,000 available. Can you
249. make money by triangular arbitrage, and if so, how much? Ignore bid offer spreads – you deal at the prices stated:

• No. You will lose $100,000 – $97,524 = $2,476

√ Yes. You will earn $102,539 – $100,000 = $2,539
• No. You will lose $100,000 – $102,539 = $2,539
• Yes. You will earn $100,000 – $97,524 = $2,476
• No. The exchange markets are in equilibrium

7. A foreign exchange trader, authorised to trade $3 million, faces the following quotes:
Spot rate: $1.5000 = £1 6 month forward: $1.5625 = £1
250. 6 month US interest rate: 6.00% per annum 6 month UK interest rate: 5.00% per annum
Approximately, how much additional profit can the trader make via one covered interest arbitrage transaction?

• 90000
• 15000
• 203200
√ 113100
• 180000

The following information is available:

USD Deposit Rate for 1 year = 11 %
USD borrowing rate for 1 year = 12 %
Ruritanian doppel deposit rate for 1 year = 8 %
251. Ruritanian doppel borrowing rate for 1 year = 10 %
Ruritanian doppel forward rate for 1 year = $0.40
Ruritanian doppel spot rate = $0.39
A US exporter denominates its Ruritanian exports in Ruritanian doppels (RUD) and expects to receive RUD600,000 in one year. What
will be the approximate value of these exports in 1 year in US dollars if the firm executes a forward hedge?

• 238584
• None of the above
• 234000
√ 240000
• 236127

252. Given a home country and a foreign country, purchasing power parity suggests that:

• the home currency will appreciate if the current home inflation rate exceeds the current foreign inflation rate
√ the home currency will depreciate if the current home inflation rate exceeds the current foreign inflation rate
the home currency will depreciate if the current home interest rate
• exceeds the current foreign interest rate
• All of the above
• the home currency will depreciate if the current home inflation rate exceeds the current foreign interest rate

253. Under a fixed exchange rate system:

• central bank intervention in the foreign exchange market is not permitted

√ central bank intervention in the foreign
exchange market is often necessary
central bank intervention in the foreign exchange market is not
• necessary since rates do not move
• All of the above
• a forward foreign exchange market does not exist as it would be pointless since rates do not move

254. The foreign-exchange market has two major segments: the over-the-counter market and ______

• stock exchange market

√ the exchange-traded market
• CME Group.
 • None of the above
• financial institution market

Denise sold U.S. dollars for Ukrainian Grivna in the United States, then sold Ukrainian Grivna for euros in Ukraine, then sold Euros for
255. U.S. dollars in the United States. Which type of foreign exchange transaction does this describe?

• Speculation
√ Arbitrage
• FDI
• None of the above
• interest arbitrage

256. The yen-dollar forward rate for yen is $.00909/´1. The spot rate is $.010/´1. Yen are thus selling at a _______.

• backward discount
√ forward discount
• forward premium
• None of the above
• discounted premium

Given the following interest rates on different currencies, which of the following is true?Sterling 6 percent.
Euro 3.5 percent.
257. Dollar 6.25 percent.
Yen 0.5 percent.

• The dollar must be at a forward premium to the yen because no one would be willing to hold yen at such a low rate of interest
√ The yen must be at a forward premium to the euro because one can borrow yen much more cheaply than euro
The euro must be at a forward premium to sterling because
• no one believes that the euro can continue to fall in value
• None of the above
The dollar must be at a forward premium to the yen because a very high percentage of
• world trade is carried out in dollars

Mature Products Corporation produces goods that are very mature in their product lifecycles. Mature Products Corporation is expected
to pay a dividend in year 1 of $2.00, a dividend of $1.50 in year 2, and a dividend of $1.00 in year 3. After year 3, dividends
258. areexpected to decline at a rate of 1% per year. An appropriate required rate of return for thestock is 10%. The stock should be worth
_____

• 9
√ 10.57
• 22.22
• None of these is correct
• 20

Sunshine Corporation is expected to pay a dividend of $1.50 in the upcoming year.Dividends are expected to grow at the rate of 6% per
259. year. The risk-free rate of return is 6%and the expected return on the market portfolio is 14%. The stock of Sunshine Corporationhas a
beta of 0.75. The intrinsic value of the stock is ______

• 10.71
√ 25
• 17.75
• None of these is correct
• 15

Fools Gold Mining Company is expected to pay a dividend of $8 in the upcoming year.Dividends are expected to decline at the rate of
260. 2% per year. The risk-free rate of return is 6%and the expected return on the market portfolio is 14%. The stock of Fools Gold
MiningCompany has a beta of −0.25. The return you should require on the stock is _______

• 2.00%
√ 4.00%
• 8.00%
• None of these is correct
• 6.00%
 The growth in dividends of Music Doctors, Inc. is expected to be 8%/year for the nexttwo years, followed by a growth rate of 4%/year
261. for three years; after this five year period, thegrowth in dividends is expected to be 3%/year, indefinitely. The required rate of return
onMusic Doctors, Inc. is 11%. Last year's dividends per share were $2.75. What should thestock sell for today?

• 8.99
√ 39.71
• 110
• None of these is correct
• 25.21

J.C. Penny Company is expected to pay a dividend in year 1 of $1.65, a dividend in year2 of $1.97, and a dividend in year 3 of $2.54.
262. After year 3, dividends are expected to grow atthe rate of 8% per year. An appropriate required return for the stock is 11%. The stock
should be worth _______ today.

• 33
√ 71.80
• 66
• None of these is correct
• 40.67

The market capitalization rate on the stock of Flexsteel Company is 12%. The expected ROE is 13% and the expected EPS are $3.60. If
263. the firm's plowback ratio is 75%, the P/E ratio will be _______.

• 7.69
√ 11.11
• 9.09
• None of these is correct
• 8.33

Sure Tool Company is expected to pay a dividend of $2 in the upcoming year. The risk-free rate of return is 4% and the expected return
264. on the market portfolio is 14%. Analysts expectthe price of Sure Tool Company shares to be $22 a year from now. The beta of Sure
Tool Company's stock is 1.25. The market's required rate of return on Sure's stock is ____.

• 14.00%
√ 16.50%
• 15.25%
• None of these is correct
• 17.50%

You are considering acquiring a common stock that you would like to hold for one year.You expect to receive both $1.25 in dividends
265. and $32 from the sale of the stock at the end ofthe year.
The maximum price you would pay for the stock today is _____ if you wanted to earn a 10% return

• 24.11
√ 30.23
• 27.50
• None of these is correct
• 26.52

A preferred stock will pay a dividend of $2.75 in the upcoming year, and every yearthereafter, i.e., dividends are not expected to grow.
266. You require a return of 10% on this stock.Use the constant growth DDM to calculate the intrinsic value of this preferred stock.

• 0.275
√ 27.50
• 56.25
• None of these is correct
• 31.82

267. A zero-coupon bond is one that

• pays interest to the investor without requiring the actual coupon to be mailed to the corporation
 • is issued by state governments because they don't have to pay interest
• is analyzed primarily by focusing ("zeroing in") on the coupon rate
• pays interest to the investor based on the general level of interest rates, rather than at a specified coupon rate
√ effectively has a zero percent coupon rate

You have just purchased a 10-year zero-coupon bond with a yield to maturity of 10% and a par value of $1,000. What would your rate
268. of return at the end of the year be if you sell the bond? Assume the yield to maturity on the bond is 11% at the time you sell.

√ 1.40%
• 20.42%
• 10.00%
• None of the above
• 13.80%

A coupon bond that pays interest annually has a par value of $1,000, matures in 5 years, and has a yield to maturity of 10%. The
269. intrinsic value of the bond today will be ______ if thecoupon rate is 7%.

• 620.92
• 712.99
• 1000
• 1123.01
√ 886.28

A coupon bond pays annual interest, has a par value of $1,000, matures in 4 years, has a coupon rate of 8.25%, and has a yield to
270. maturity of 8.64%. The current yield on this bond is

• 7.95%
• None of the above
• 8.65%
• 8.45%
√ 8.36%

A coupon bond is reported as having an ask price of 108% of the $1,000 par value in the Wall Street Journal. If the last interest payment
271. was made one month ago and the coupon rate is 9%, the invoice price of the bond will be ____________.

√ 1087.50
• 1110.10
• 1150
• 1160.25
• None of the above

An 8% coupon U. S. Treasury note pays interest on May 30 and November 30 and is traded for settlement on August 15. The accrued
272. interest on the $100,000 face value of this note is _________.

• 491.80
√ 1661.20
• None of the above
• 800
• 983.61

A coupon bond pays annual interest, has a par value of $1,000, matures in 4 years, has a coupon rate of 8.25%, and has a yield to
273. maturity of 8.64%. The current yield on this bond is ___________.

• 8.65%
• 8.45%
• None of the above
• 7.95%
√ 8.36%

274. When a bond indenture includes a sinking fund provision?

 • bondholders always benefit, because principal repayment on the scheduled maturity date is guaranteed
• firms must establish a cash fund for future bond redemption
• none of the above are true
• both A and B are true
√ bondholders may lose because their bonds can be repurchased by the corporation at below-market prices

Consider two bonds, X and Y. Both bonds presently are selling at their par value of $1,000. Each pays interest of $150 annually. Bond
275. X will mature in 6 years while bond Y will mature in 7 years. If the yields to maturity on the two bonds decrease from 15% to 12%
then...

• none of the above

• both bonds will decrease in value, but bond X will decrease more than bond Y
• both bonds will increase in value, but bond X will increase more than bond Y
√ both bonds will increase in value, but bond Y will increase more than bond X
both bonds will decrease in value, but bond Y will decrease
• more than bond X

276. Which of the following would increase the net asset value of a mutual fund share, assuming all other things remain unchanged?

• A change in the fund's management

• A decrease in the value of one of the fund's stocks
• An increase in the number of fund shares outstanding
• An increase in the fund's accounts payable
√ An increase in the value of one of the fund's stocks

The profitability Fund had NAV per share of $17.50 on January 1, 2009. On December 31 of the same year the fund's NAV was $19.47.
277. Income distributions were $0.75 and the fund had capital gain distributions of $1.00. without considering taxes and transactions costs,
what rate of return did an investor receive on the Profitability fund last year?

• 9.83%
• 11.26%
• 15.54%
√ 21.26%
• 16.97%

Diversified Portfolios had year-end asets of $279,000,000 and liabilities of $43,000,000. If Diversified's NAV was $42.13, how many
278. shares must have been held in the fund?

• 43000000
√ 5601709
• 1182203
• 5402761
• 6488372

Multiple Mutual Funds had year-end assets of $ 457,000,000 and liabilities of $17,000,000. There were 24,300,000 shares in the fund at
279. year-end. What was Multiple Mutual's Net Asset Value?

• 7
• 181.07
• 18.81
• 69.96
√ 18.11

You purchased shares of a mutual fund at a price of $17 per share at the beginning of the year and paid a front-end load of 5.0%. If the
280. securities in which the fund invested increased in value by 12% during the year, and the fund's expense ratio was 1.0%, your return if
you sold the fund at the end of the year would be ____________.

√ 5.45
• none of the above
• 4.75
• 5.65
• 4.39
 Premier Fund had year-end assets of $825,000,000 and liabilities of $25,000,000. If Premier's NAV was $32.18, how many shares must
281. have been held in the fund?

• 22930546.28
• 25693645.25
• None of the above
√ 24860161.59
• 21619346.92

282. At issue, offering prices of open-end funds will typically be

• less than NAV due to loads and commissions

• less than or greater than NAV with no apparent pattern
• greater than NAV due to greater demand
• less than NAV due to limited demand
√ NAV or greater due to loads and commissions

283. Large amounts of money invested in a portfolio that is fixed for the life of the fund are called

• closed-end funds
• redeemable trust certificates
• open-end funds
√ unit investment trusts
• REITS

Century fund had average daily assets of $3.0 billion in 2009. The fund sold $750 million worth of stock and purchased $850 million
284. worth of stock during the year. Century fund's turnover ratio is

• 0.275
• 20.00%
• 15.00%
√ 0.25
• 0.12

285. Which one of the following statements regarding open-end mutual funds is false?

• B and C
• The funds redeem shares at net asset value
• The funds offer investors professional management
√ The funds offer investors a guaranteed rate of return
• A and B

286. For __________ orders, the stock is to be sold if its price falls below a stipulated level

• Non of the above

• stop-buy
• limit-buy
√ stop-loss
• limit-sell

Assume you purchased 100 shares of common stock at $50 per share using $2,500 of your own money. The initial margin requirement
287. is 50%. If the maintenance margin is 30%, at what price would you get a margin call?

• 78
• 77.12
√ 35.71
• 50
• 26.14
288. You sell short 200 shares of Bad Co. at a market price of $55 per share. Your maximum possible loss is

• 11000
√ unlimited
• 22000
• Cannot tell from the given information
• zero

Assume you sell short 100 shares of common stock at $45 per share, with initial margin at 50%. What would be your rate of return if
289. you repurchase the stock at $40 per share? The stock paid no dividends during the period, and you did not remove any money from the
account before making the offsetting transaction.

• 25.00%
√ 22.00%
• 77.00%
• none of the above
• 20.00%

290. Assume you purchased 500 shares of CSCO at $20 per share. The initial margin is 40%. Your investment was

• 3000
√ 4000
• 9000
• 7800
• 5000

Which of the following statements is (are) true regarding municipal bonds?

I) A municipal bond is a debt obligation issued by state or local governments.
291. II) A municipal bond is a debt obligation issued by the federal government.
III) The interest income from a municipal bond is exempt from federal income taxation.
IV) The interest income from a municipal bond is exempt from state and local taxation in the issuing state.

• I and II only
√ I, III, and IV only
• I, II, and III only
• I and IV only
• I and III only

292. Which one of the following terms best describes Eurodollars:

• dollar-denominated deposits in European banks

√ dollar-denominated deposits at foreign banks and branches of American banks outside the U.S
• dollar-denominated deposits at American banks in the U.S.
• dollars that have been exchanged for European currency
• dollar-denominated deposits at branches of foreign banks in the U.S.

293. With regard to a futures contract, the long position is held by

• the trader who bought the contract at the largest discount

√ the trader who commits to purchasing the commodity on the delivery date
• the trader who plans to hold the contract open for the lengthiest time period
• the trader who commits to delivering the commodity on the delivery date
• the trader who has to travel the farthest distance to deliver the commodity

Which of the following are characteristics of preferred stock?

I. It pays its holder a fixed amount of income each year, at the discretion of its managers.
294. II. It gives its holder voting power in the firm.
III. Its dividends are usually cumulative.
IV. Failure to pay dividends may result in bankruptcy proceedings.

• I, III, and IV
√ I and III
 • I, II, and IV
• I, II, III, and IV
• I, II, and III

A 5.5% 20-year municipal bond is currently priced to yield 7.2%. For a taxpayer in the 33% marginal tax bracket, this bond would offer
295. an equivalent taxable yield of:

• 10.75%
√ 8.20%
• 4.82%
• none of the above
• 11.40%

Which of the following statements is (are) true regarding municipal bonds?

I. A municipal bond is a debt obligation issued by state or local governments
296. II. A municipal bond is a debt obligation issued by the federal government.
III. The interest income from a municipal bond is exempt from federal income taxation.
IV. The interest income from a municipal bond is exempt from state and local taxation in the issuing state.

• I and III only

√ I, III, and IV only
• I, III, and IV only
• I and IV only
• I, II, and III only

297. The bid price of a T-bill in the secondary market is

• the price at which the dealer in T-bills is willing to sell the bill
√ the price at which the dealer in T-bills is willing to buy the bill
• the price at which the investor can buy the T-bill
• never quoted in the financial press
• greater than the asked price of the T-bill

298. Which one of the following is not a money market instrument?

• a negotiable certificate of deposit

√ Treasury bond
• a Treasury bill
• commercial paper
• a Eurodollar account

Which of the following is true about mortgage-backed securities?

I. They aggregate individual home mortgages into homogeneous pools.
299. II. The purchaser receives monthly interest and principal payments received from payments made on the pool.
III. The banks that originated the mortgages maintain ownership of them.
IV. The banks that originated the mortgages continue to service them.

• II, III, and IV

√ I, II, and IV
• I, III, and IV
• I, II, III, and IV
• II and IV

During the period between 2000 and 2002, a large number of scandals were uncovered. Most of these scandals were related to
I. Manipulation of financial data to misrepresent the actual condition of the firm.
300. II. Misleading and overly optimistic research reports produced by analysts
III. Allocating IPOs to executives as a quid pro quo for personal favors.
IV. Greenmail

• II, III, and IV

√ I, II, and III
• II and IV
• I, III, and IV
 • I, II, and IV

301. Based on the supply and demand model of the exchange rate, which of the following should cause the Philippine peso to appreciate?

• Concern abroad over the safety of Philippine toy exports

• An increase in Philippine savings that is used to purchase financial assets in Europe.
• Increased imports by Philippine consumers of electronics made in Taiwan
√ An increase in remittances from Philippine workers abroad to their families at home.
• Repayment by the Philippine government of its debt to the IMF

Suppose the following facts (not all of which

are relevant to the answer): • Yesterday the exchange rate between the British pound and the US dollar was 2.00 £/$. • The interest rate
in the U.S. is 6% per year. • The rate of inflation in the U.K. is 1% per year. • The public expects the exchange rate tomorrow to be 1.92
302. £/$. • The rate of inflation in the U.S. is 3% per year. • The interest rate in the U.K. is 5% per year. • The U.S. bilateral trade deficit with
the U.K. is 2% of U.S. GDP. Then according to the asset theory of exchange rate determination, the exchange rate today should be
approximately

• 2.00 £/$
• 1.98 £/$
• 1.96 £/$
• 2.02 £/$
√ 1.92 £/$

Long-term exchange rate fluctuations tend to be (A) ________ than daily changes in absolute terms, but there are (B) _______ changes
303. which are (C) __________ reversed.

• (A) larger; (B) fewer; (C) rarely

√ (A) larger; (B) fewer; (C) abruptly
• (A) smaller; (B) more; (C) rarely
• (A) smaller; (B) fewer; (C) abruptly
• (A) larger; (B) more; (C) abruply

________ interest rate parity involves (B) _______ domestic and foreign interest rates and the spot and the (C) __________ exchange
304. rates.

• (A) Covered; (B) riskless; (C) expected future

• Uncovered; (B) future; (C) forward
• Uncovered; (B) future; (C) forward
√ (A) Covered; (B) riskless; (C) forward
• (A) Covered; (B) future; (C) forward

Suppose the following bilateral spot exchange rates are being quoted for the Danish krone (DKK), the US dollar (US$) and the euro (€):
305. US$/€ = 1.5, DKK/€ = 7.0, DKK/$ = 5.0
If you start with 100€, the most you could end up with in a single round of triangular arbitrage would be..

• 103.25
• 117.60
• 93.33
• 98.66
√ 107.14

306. To understand the current nominal exchange rate, we need to know all of the following except..

• all the given information

• .present and future expected domestic interest rates.
• the long-run value of the exchange rate.
√ .last period's nominal exchange rate.
• present and future expected foreign interest rates.

If the initial margin is 50%, and you are selling 200 shares short at $30/share, how much money do you have to provide and how much
307. is in your account?
 • $2,000; $7,000
• $6,000; $18,000
• $1500; $4500
√ $3,000; $9,000
• $750; $2250

The initial margin is 50%, and you are buying 200 shares at $30/share. The maintenance margin is 15%. At what price would you have
308. a margin call?

• 16.75
• 15
√ 17.65
• 12
• 5

The initial margin is 50%, and you are buying 200 shares at $30/share. If you sell at a price of $20 one year from now and the margin
309. interest rate was 10%, what was your rate of return?

• 0.767
• 0.50
• -0.50
• -0.67
√ -0.767

You invest $25,000 and take a SHORT position in a stock with a price of $100. Initial margin rate is 50%.
310. Assume you will receive a margin call if the margin rate drops below 30%. ABOVE what price will you receive a margin call?

• 110
• 100
• 135
√ 115.38
• 125

You invest $25,000 and take a SHORT position in a stock with a price of $100. If the initial margin rate is 50%, how many shares
311. did you short?

• 100
• 300
• 200
√ 500
• 400

You put up $10,000 to take a long position in a stock with a price of $20. You will receive a margin call if the margin rate drops below
312. 30%. Below what price will you
receive a margin call?

• 18.75
• 6.71
• 4.82
• 6.51
√ 5.71

You put up $10,000 to take a long position in a stock with a price of $20. If the initial margin rate on the position is 80%,
313. how many shares can you purchase?

• 250
√ 625
• 800
• 400
• 25

314. If S = spot price, E = exercise price, then the value of a put option is given by
 • MAX (0, S – E)
√ MAX (0, E – S)
• MIN (0, S – E)
• MAX (0, S + E)
• MIN (0, E – S)

Suppose an investor buys an option for a $1000 premium on a $100,000 August T-bill futures contract with a strike price of 120. On the
315. expiration date, the T-bill futures contract has a price of 115. (Recall that arbitrage will result in the spot price equalling the futures
contract price.) What is the individual likely to do?

• He will buy the asset and make a profit of $5,000

√ He will not buy the option but he will suffer a loss of $1,000
• He will buy the option but suffer a loss of $5,000
• He will buy the asset and make a profit of $10,000
• He will not buy the asset and thus suffer no loss

316. The person who takes a short position usually

• buys an asset with the intent of selling it in the future at a higher price for profit
√ sells an asset that he does not own with the intent of buying it back in the future at a lower price
• sells an asset that he does not own with the intent of buying it back in the future at a higher price
• Hedges himself against the market price fluctuations
• owns the asset but sells it with the intent of buying it back at a higher price.

A Canadian importer has ordered $1,000,000 US worth of software to be delivered in six months. The current spot exchange rate is
$1.50 CAN = $1.00 US. However, the importer fears that the Canadian dollar will depreciate to $1.55 CAN = $1.00 US in the next 6
317. months. As a result, the importer purchases $1,000,000 US at today's prevailing six-month forward rate of $1.52 CAN = $1.00 US.
What is the savings to the importer from his dealings in the forward market?

• 50,000 CAN
√ 30,000 CAN
• 30,000 USD
• 50000 USD
• 20,000 CAN

318. Which of the following investment strategies has unlimited profit potential?

• Covered call
√ Protective put.
• Writing a call
• writing a put
• Bull spread

319. Which of the following strategies will be profitable if the price of the underlying asset is expected to decrease?

• buy call sell put

√ Buying a put or sell call
• buy call and buy put
• non of answers
• sell put ans sell call

320. Which of the following actions will not close a long position in a call option?

• Exercising the call.

• Allowing the call to expire.
√ Buying a put with the same strike price, expiration, and underlying asset.
• Selling a call with the same strike price, expiration, and underlying asset

321. Which of the following is not a characteristic of option contracts that trade on the Chicago Board Options Exchange?
 • It is easy to transfer the contracts between investors
√ Option holders must take physical delivery of the underlying asset.
• The contracts are standardized.
• it is a hedge instrument
• Option writers are required to put up collateral.

Suppose you sell a call and buy one share of stock. What is your cash payoff when the option expires? (Ignore the costs of the call and
322. the share of stock).

• Receive St if St ≤ X and receive –(St –X) if St > X.

√ Receive St if St ≤ X and receive X if St > X.
• Receive (St – X) if St ≤ X and receive X if St > X.
• Receive St if St ≤ X and receive (St – X) if St > X.
• Receive X if St ≤ X and receive St if St > X.

323. Which of the following is most similar to a stock broker?

• Local.
√ Futures commission merchant
• Pit trader.
• forex trader
• Floor broker.

324. Which one of the following actions will offset a long position in a futures contract that expires in June?

• Sell any futures contract, regardless of its expiration date.

√ Sell a futures contract that expires in June.
• Hold the futures contract until it expires.
• Buy any futures contract, regardless of its expiration date.
• Buy a futures contract that expires in June.

325. Standardized futures contracts exist for all of the following underlying assets except:

√ common stocks
• wheat
• Treasury bonds.
• stock indexes.
• gold.

326. _______ institutions are ____ likely to fail, reducing the impact of a financial crisis.

• Smaller, less
√ Larger, less
• Larger, equally
• B and C
• Larger, more

327. Asymmetric information means that

• all parties to a transaction have the same amount of information on the other party.
√ one party to a transaction has relatively more information than another party.
• information is readily available for most parties concerned in a transaction.
• Non of the above
• information is expensive to obtain

328. To solvse the crisis most central banks

• Increased rates
√ decreased rates and started quantitative easing program
• increased required reserve ratios
 • all of the above
• decreased money supple

329. One of the following is not an advantage of fiscal consilidation policy in Eurozone Countires

• Debt reduction and affordability improves

√ Provides banks with term funding & cash for collateral.
• Helps fund periphery. Euro viability improves
• Reduces costs for problem countries
• Euro credibility improves.

330. The modern commercial banking system began in America when the

• Bank of the United States was chartered in New York in 1801

√ Bank of North America was chartered in Philadelphia in 1782
• Bank of North America was chartered in New York in 1782
• None of the above
• Bank of the United States was chartered in Philadelphia in 1801

331. the bond markets are important because:

• they are easily the most widely followed financial markets in the United States
√ they are the markets where interest rates are determined
• All of the above
• None of the above
• They are the markets where foreign exchange rates are determined

332. This Country gained from negative interest rates and low bond yields in Eurozone countries

• Portugal
√ Finland
• Spain
• UK
• Ireland

333. Which organization were in the Troika to solve the European debt crisis

• WB, ECB, IMF

√ IMF, ECB and Eutopean Comission
• ECB, FED, European Council
• Non of the above
• UN, EU, NATO

334. Which statement about Credit Default Swaps (CDS) is incorrect?

• it is a credit derivative
• they trade in the OTC market.
• CDSs allow the buyer of a risky bond the ability to convert it into a risk free bond
√ they are regulated by state insurance commissions
• it provides insurance against the risk of default of a particular company

335. Which statement about Structured Investment Vehicles (SIVs) is incorrect?

SIVs predominately invest

• only in high-grade Aaa/AAA MBS.
All of the answerBy investing in a variety of MBS, an SIV further
• diversifies the credit risk of MBS investments are correct
SIV raises short-term funds in the commercial paper market to
• finance longer-term investment in MBS
SIVs are subject to the
• interest rate risk
 √ SIVs are not highly levered

An analyst feels that Brown Company's earnings and dividends will grow at 25% for two years, after which growth will fall to a
336. constant rate of 6%. If the projected discount rate is 10%, and Brown's most recently paid dividend was $1, the value of Brown's stock
using the multistage dividend discount model is closest to:

• 34.46
• 30.05
• 33.54
• 31.25
√ 36.65

The XX Company paid a $1 dividend in the most recent period. The company is expecting dividends to grow at a 6% rate into the
337. future. What is the value of this stock if an investor required a 15% rate of return on stocks of this risk class?

• 13.11
• 9.86
• 10.60
• 11.11
√ 11.78

338. The next year's dividend is expected to be $2, g=7%, and k=12%. What is the stock's intrinsic value?

• 52.40
• 44.28
• 28.57
• 42.80
√ 40

339. What would be investor willing to pay for a share of preferred stock that pays annual $7 dividend if the required rate is $7.75?

• 88.70
• 72.82
• 77.50
• 87.50
√ 90.32

Calculate the value of a stock that paid $1 dividend last year, if next year;s dividend will be 5% higher and the stock will sell for $13.45
340. at year-end. The required return is %13.2.

• 14.66
• 14.50
• 11.46
• 10.50
√ 12.81

The required return on asset an asset with beta of 0.95 is 7.9 % and the riskless return is 6%. What is the expected return on the market
341. portfolio?

• 7.40%
• 8.80%
√ 8.00%
• 7.00%
• 7.80%

Hideki Corporation has just paid a dividend of $450 per share. Annual dividends are expected to grow at the rate of 4% per year over
342. the next four years. At the end of four years, shares of hideki Corporation are expected to sell for $9,000. If the required rate of return is
12%, theintrinsic value of a share of hideki Coporation is closest to:

• 5850
√ 7220
• 5950
 • 4950
• 7670

An investor is considering the purchase of a common stock with $2.00 annual dividend. The dividend is expected to grow at a rate of
343. 4% annually. If the investor's required rate of return is 7%, the intrinsic value of the stock is closest to:

• 50
√ 69.33
• 56.67
• 52.27
• 66.67

344. The volume of OTC currency options trading is

• Much smaller than that of organized-exchange currencty option trading

√ Much larger than that of organized-exchange currencty option trading
• Both are same size
• None of the above
• Larger, because the exchanges are only repackaging OTC options for their customers

345. An American option is more valuable than a European option on the same dividend-paying stock with the same terms because the:

• Dividend will be in USD and this is a more universally acceptable currency than the EUR
√ American option can be exercised from date of purchase until expiration, but the European option can be exercised only at expiration
• American options are traded on US exchanges, which offer much more volume and liquidity
• European options do not conform to the Black and Scholes model and are often mispriced
• European option contract is not adjusted for stock splits and stock dividends

346. Which one of the following transactions would be considered a protective strategy?

• Sell a call against a stock you sold short

√ Buy a put on a stock you own
• Buy a call on a stock you own
• Sell a naked put
• Sell a put on a stock you own

From the perspective of the writer of a put option written on 62,500 Euro. If the strike price is $1.25/Euro, and the option premium is
347. $1,875, at what exchange rate do you start to lose money?

• $1.25/Euro
√ $1.22/Euro
• $1.82/Euro
• None of the above
• $1.28/Euro

348. If you think that the dollar is going to appreciate against the euro

• you should buyput option on the euro

√ you should buy call option on the euro
• you should buy call option on the dollar
• None of the above
• you should sell call option on the euro

349. Cross currency swaps typically have larger swings in total value than plain vanilla interest rate swaps because:

• (A) and (C) are both correct

• Interest rate movements are more volatile than currency movements
• Interest rate swap agreements do not allow, contractually, large movements from pa
√ Cross currency swaps exchange principal as well as interest payments
• All are valid explanations
350. The difference between the value of a call option and a put option with the same exercise price is due primarily to:

• The effect of dividends on the two securities

√ The differential between the current stock price and the exercise price in present value terms
• The use of continuous as opposed to discrete discounting
• The volatility of the price of the underlying stock
• The greater liquidity of call options

351. If a call option is far 'out of the money' the value of the option will be:

• Zero
√ Less than the value of a put option with the same exercise price
• Greater than the value of a put option with the same exercise price
• None of the above is correct
• Equal to the value of a put option with the same exercise price

Assume the implied PPP rate of exchange of Mexican Pesos per U.S. dollar is 8.50 according to the Big Mac Index. Further, assume the
352. current exchange rate is Peso 10.80/$1. Thus, according to PPP and the Law of One Price, at the current exchange rate the peso is:

• overvalued
√ undervalued
• Not enough information to answer
• None of the above
• correctly valued

353. The price of a Big Mac in the U.S. is $3.41 and the price in Mexico is Peso 29.0. What is the implied PPP of the Peso per dollar?

• 10.8/$1
√ 8.50/$1
• 12.05/$1
• None of the above
• 11.76/$1

Other things equal, and assuming efficient markets, if a Honda Accord costs $21,375 in the U.S. then at an exchange rate of
354. $1.98/pound, the Honda Accord should cost _____ in Great Britain.

• 21375
√ 10795
• 42322
• 38420
• 18365

If according to the Law of One Price the current exchange rate of dollars per British Pound is $1.75/Pound, then at an exchange rate of
355. $1.85/pound, the dollar is_____?

• Correctly valued
• Unknown relative valuation
• None of the above
• Overvalued
√ Undervalued

According to the Big mac index, the implied PPP exchange rate is Mexican peso 8.50/$1 but the actual exchange rate is peso 10.80/$1.
356. Thus, at current exchange rate the peso appears to be ______ by______.

• Overvalued; approximately 21%

√ Undervalued; approximately 21%
• Undervalued; approximately 27%
• None of the above
• Overvalued; approximately 27%
 If the current exchange rate is 113 Japanese yen per U.S. Dollar, the price of a Big Mac hamburger in the United States is $3.41, and the
357. price of a Big Mac hamburger in Japan is 280 Yen, then the other things equal, the Big Mac hamburger in Japan is_____

• Correctly prices
√ Underpriced
• Not enough information to determine if the price is appropriate or not
• None of the above
• Overpriced

358. Calculate the resudual value for the end of the year of a building with residual value of 130.000 AZN for the beginning of the year.

• 11570 AZN
• 23400 AZN
√ 120900 AZN
• 121200 AZN
• 130000 AZN

359. Calculate property tax from a building with residual value of 330.000 AZN for the beginning of the year.

• 5867,7 AZN
• 4562,6 AZN
√ 3184,5 AZN
• 2227,3 AZN
• 2765,4 AZN

360. For which of the following purposes may the amounts on the VAT deposit account be used by a taxpayer?

• For long term investments

• For payments bought via e-commerce operations
• Payment for services bought from non-VAT payers
√ For payment of other taxes
• For short term investments

361. Which of the following is a circumstance under which taxpayer cannot be held liable for violation of tax legislation?

• Bank was closed

• Forgot to pay on time
√ If violation happened as a result of a natural disaster
• Was absent from the country
• Did not know the law

362. Which of the following are excisable goods?

√ Crude oil, gasoline, energy drinks

• Sport yachts, tobacco based products, natural gas
• Jewellery, leather handbags, 20% ethyl alcohol
• Sport yachts, grain products, whisky
• Buses, sport yachts, wine, textile

363. Which one of the below is defined as a duty of the taxpayer?

• To provide all documents for inspection by the tax authorities at any occasion if requested
• To come to the tax office at any time when invited
√ Use cash registers if carrying out an activity where cash registers are mandatory
• To agree with all conclusions of the tax audit
• To follow any requirement of the tax authority

364. Who is reponsible for withholding of VAT from electronic commerce transactions of an individual who is not registered as a taxpayer?

• Supplier of the e-commerce platform

 • Local tax department
• Municipality
√ Bank, serving his bank card
• Employer

365. What happens is a taxpayer's repair expenses are lower of the established annual rate?

• Written-off
• Unused part is added to the residual value of the fixed asset
√ Unused part may be deducted in the following year
• Deducted in the same year
• Doubles the rate for next year

366. What happens with a part of the repair expense that exceeds the established annual rate?

• Written-off
• Transferred to the next year
• Doubles the rate for next year
√ Added to the residual value of the fixed asset and depreciated
• Deducted in the same year

367. Which of the following is a circumstance under which taxpayer cannot be held liable for violation of tax legislation?

• Forgot to pay on time

• Did not know the law
• Was absent from the country
√ Acted as per written instruction of the tax authority
• Bank was closed

368. Which of the following is defined as a right of a taxpayer?

• Not to pay tax if there are no funds in the bank account

• Not to provide documents to tax inspectors if the documents are in foreign language
• Not to send a tax return if does not agree with the deadline
• Not to pay tax if income was less than he predicted
√ To get the information on changes to tax legislation free of charge

369. Which of the following is defined as a right of tax authorities?

• Request a taxpayer to pay profit tax with a higher rate for the current year
• Request from a taxpayer to pay for lunches during tax audit
• Request from taxpayer to work on non-working days during on-site audit
√ Request from a taxpayer all documents relating to operations during an on-site audit
• Request taxpayers to pay taxes for next year in advance

370. Which of the following expenses are deductible for the purpose of profit tax?

• Medical expenses of the shareholders

• Gift expenses for government officials
• Meal expenses of employees
√ Salaries of employees
• Repair expenses of the house of the director

371. For which of the following purposes may the amounts on the VAT deposit account be used by a taxpayer?

• Payment for services bought from non-VAT payers

• For payments bought via e-commerce operations
• For long term investments
• For short term investments
√ For payment of VAT to suppliers
372. What is the VAT rate applicable to the sale of airline tickets?

• 0.18
• 0.20
√ 0
• 0.14
• 1% of the amount exceeding 500 AZN

Under which condition an embassy of a foreign country in Azerbaijan may be subject to 0% VAT rate and consequent reimbursement of
373. paid VAT?

• If there is no separate building of an embassy

• If the sending country asks for it the Ministry of Foreign Affairs of Azerbaijan
• If there is a Presidential decree regarding that embassy
√ If the sending country applies the same rules for the embassy of Azerbaijan there
• If Parliament has approved it

374. Who are the payers of excise tax?

• Retail sellers of alcohol and tobacco

• All VAT payers
√ Producers and importers of excisable goods
• Oil, fur, tobacco and alcohol traders
• Consumers of alcohol and tobacco

375. Which of the following are excisable goods?

• Textile, electronic cigarettes, diesel fuel

• Chocolate, fur, cargo shipping boats
• Vehicles for agricultural works , non-alcoholic beer, diamonds
√ Furs, cigarettes, sport cars
• Chocolate, grain products, energy drinks

376. What is the time of taxable transaction for the purpose of excise tax with respect to tobacco products imported to Azerbaijan?

• The month in which tobacco products are produced

• Time of sale of imported tobacco products to the wholesellers
• Time of sale of imported tobacco products to the final consumers
√ Time when the products are released from the control of tax authorities
• The month in which import contract was concluded

377. What is the time of taxable transaction for the purpose of excise tax with respect to tobacco products produced in Azerbaijan?

• The month in which tobacco products are produced

√ Time when the products are released from the production facility
• Time of sale of tobacco products
• Time of export of tobacco products
• The quarter in which tobacco products are produced

378. Which of the following are excisable goods?

• Ambulance vehicles, fruit based juice products, electronic cigarettes

√ Jet Fuel, non-alcoholic energy drinks, liquid for electronic cigarettes
• Electronic cigarettes, non-alcoholic beer, gasoline
• Cigarettes, non-alcoholic beer, cigars
• Gasoline A-92, furs, ambulance vehicles

Calculate the annual property tax from a building under the ownership of the Company if the residual value of that building for the
379. beginning of the year was 1.300.000 AZN
 • 12090 AZN
√ 12545 AZN
• 130000 AZN
• 26000 AZN
• 130000 AZN

Calculate the average annual residual value of a building under the ownership of the company if the opening balance value of that
380. building for the beginning of the year was 200.000 AZN.

• 150000 AZN
• 80000 AZN
• 190000 AZN
• 160000 AZN
√ 186000 AZN

Calculate the average annual residual value of a building under the ownership of the company that had a residual value of 700.000 AZN
381. for the beginning of the year

• 651000 AZN
√ 675500 AZN
• 590000 AZN
• 610000 AZN
• 575000 AZN

382. What is the simplified tax rate for withdrawal of cash from business bank accounts by legal entities and private entrepreneurs?

• 0.02
√ 0.01
• 0.04
• 0.08
• 0.06

383. Which of the following may choose to be a simplified taxpayer?

• Producer of alcoholic beverages

√ Retaurant with monthly turnover of 250000 AZN
• Operator of betting games
• Credit organization
• Importer of jewellery

384. Which of the below must in any case be a payer of the simplified tax?

• Investment funds
√ Operators of betting games
• Banks
• Producers of agricultural production
• Restaurants

385. Which of the following cannot be a payer of the simplified tax?

• Restaurants
√ Investment funds
• Sellers of betting games
• Companies carrying out transportation of passengers and cargo within the borders of Azerbaijan
• Operators of betting games

386. What is the general turnover threshold below which a qualified taxpayer may be a payer of the simplified tax?

• 20000 AZN
 √ 200000 AZN
• 150000 AZN
• 1000000 AZN
• 100000 AZN

387. Which document gives a right to claim VAT from budget with respect to the imported goods?

• Invoice of the supplier

√ Customs declaration
• Approval letter of the local tax autority
• Approval letter from the customs authority
• Invoice of the producer

388. Which is the time of transaction for the purpose of VAT when provision of goods includes their delivery?

• When transportation ends

√ Time of payment for the goods
• When cargo loading ends
• When the transport mean crosses the border of Azerbaijan
• When cargo loading begins

389. The place of rendering of a service for which of the following is the location of the buyer?

• Medical services
√ Telecommunication services
• Catering services
• Translation services
• Financial services

390. Which of the following is exempt from VAT?

• Catering services
√ Funeral services
• Coffee shops
• Import of toys
• Medical services

391. Which of the following is not exempt from VAT?

• Financial services
• Sale of shares in a legal entity
√ Translation services
• Sale of newspapers
• Funeral services

A resident Company had the following transactions:

-Provided services for the period covering 10-15 March. The amount to be received for these services is AZN 32,000. This amount was
transferred on 20 April 2014;
392. -Received the prepayment in the amount of AZN 18,000 on 30 April. The period of services covers April - June 2014;
-Sold goods on 02 April 2014. The value of the sale is AZN 6,000. However payment was received on 12 May.
According to these transactions, calculate the VAT payable to the budget by the Company for the month of April. Please note that all the
amounts are exclusive of VAT.

• 5000 AZN
√ 9000 AZN
• 12000 AZN
• 8200 AZN
• 6000 AZN
 A resident company paid the amount of the invoice received from its supplier (a legal entity resident in Azerbaijan) in respect of the
provided services. All the amounts are exclusive of VAT. According to the details of the invoice, calculate the claimable VAT:
1. Apartment rent of employees – AZN 8,000;
393. 2.Migration services – AZN 2,200
3.Warehouse rent – AZN 18,000
4.Catering services – AZN 5,400

• 2636 AZN
√ 3636 AZN
• 5226 AZN
• 2445 AZN
• 4348 AZN

Company X had the on-site tax audit started on 1 March 2015. During the audit, the tax authority detected the following issues:
1.VAT for the period of September 2014 through January 2015: It was identified that Company X has been understating its VAT
liability for all these months by AZN 44,000.
394. 2.Personal Income Tax for December 2014: The tax authorities have identified that Company X has understated its personal income tax
liability by AZN 18,000.
According to the provided information, calculate the total financial sanction for the aforesaid incompliances in respect of the detection
date.

• 73000 AZN
√ 93000 AZN
• 81000 AZN
• 58000 AZN
• 75000 AZN

395. Resident individual person earns the income 1,600 AZN from the entrepreneurial activity. Calculate the personal income tax.

• 220 AZN
√ 320 AZN
• 550 AZN
• 510 AZN
• 450 AZN

A resident company made a payment to a non-resident company without PE in Azerbaijan in connection with the consulting services.
396. The paid amount after withholding tax is AZN 36,000. Calculate the withholding tax to be paid to the state budget in respect of this
service.

• 45000 AZN
√ 40000 AZN
• 52000 AZN
• 55000 AZN
• 50000 AZN

During the desk audit started on 10 July 20XX, it was detected that the Company understated its VAT liabilities for May 20XX by AZN
397. 14,000 . Calculate the total payable amount in connection with the aforesaid incompliance for the date of detection.

• 21000 AZN
√ 21280 AZN
• 23000 AZN
• 24880 AZN
• 23800 AZN

A resident individual received the annual income from the non-entrepreneurial activities at the amount of AZN 34,000. Calculate the
398. income tax.

• 5560 AZN
√ 4760 AZN
• 4450 AZN
• 8160 AZN
• 6760 AZN
 The Company sold its asset having AZN 13,300 residual value for AZN 15,700. Calculate the profit tax effect in respect of this
399. transaction.

• 515 AZN
√ 480 AZN
• 550 AZN
• 720 AZN
• 580 AZN

Company A sold its car having residual value AZN 14,000 for AZN 17,000. Moreover, the company also sold equipment having
400. residual value AZN 12.000 for AZN 10,000. Calculate the effect on the Company`s profit tax in respect of these transactions.

• 500 AZN
√ 200 AZN
• 600 AZN
• 700 AZN
• 550 AZN

401. How long should a foreign individual stay in Azerbaijan to be deemed as a tax resident?

• 120
√ 183
• 91
• 45
• 90

During the year of 20XX the Company A incurs repair expenses in the amount of AZN 3,400.00 for an equipment with residual value of
402. AZN 32,000 at the beginning of the current year. Please define the deductible part of the above mentioned repair expense.

• 2600 AZN
√ 1600 AZN
• 2000 AZN
• 1700 AZN
• 3400 AZN

Dividends paid in the Azerbaijan Republic to a resident physical individual or legal entity for the shares owned for more than 3 years
403. are…

• Subject to tax at the source of payment at the rate of 10%

√ Exempt from tax
• Increases the value of property
• Not recognized as income
• Deductible for profit tax purpose

The residual values of fixed asset at the beginning of the year are as follows.
Building – AZN 150,000;
404. 5 Cars – each one AZN 5,400;
4 Printers – each one 450 AZN;
According to the provided information, calculate the total amount of the depreciation for that year.

• 18610 AZN
√ 17610 AZN
• 14610 AZN
• 13610 AZN
• 15610 AZN

405. Which of the following is not an employment income?

• Salary
√ Income from rent
• Excess amount of business trip expenses
• Insurance premiums paid by the employer
 • Additional bonus on salary

Residual value of the car is AZN 12,000 for the end of the year 20XX. Total repair expenses incurred for this transport is AZN 750.00.
406. Please define repair expenses to be capitalized into the fixed asset.

• 750 AZN
√ 150 AZN
• 500 AZN
• 550 AZN
• 600 AZN

The residual value of the equipment at the end of 2013 is AZN 400,000. In 2014 the company incurred the repair expenses in the
407. amount of AZN 30,000. According to the provided information, calculate the depreciation for 2014.

• 62000 AZN
• 28700 AZN
• 102000 AZN
• 112000 AZN
√ 82000 AZN

The residual values of the fixed assets at the beginning of the year are as follows.
Building – AZN 5 mln;
5 Cars – each one AZN 4,800;
408. Equipment – AZN 150,000
10 Computers – each one 400 AZN;
According to the provided information, calculate the total amount of the depreciation for that year.

• 332000 AZN
• 362000 AZN
• 347000 AZN
• 350000 AZN
√ 387000 AZN

Due to the miscalculations during the preparation of profit tax return, the profit of a Company was understated by AZN 12,000.
409. Calculate the amount of the understated tax as a result of this error.

• 3500 AZN
• 500 AZN
• 4500 AZN
√ 2500 AZN
• 1500 AZN

During the year of 20XX the Company A incurs repair expenses in the amount of AZN 6,400.00 for a car having AZN 42,000 as
410. residual value for the beginning of the current year. Please define the deductible part of the above mentioned repair expense.

• 3400 AZN
• 6400 AZN
• 2500 AZN
• 2400 AZN
√ 2100 AZN

Due to the miscalculations of the profit, the profit tax liability was understated for the amount of AZN 6,000. Calculate the amount of
411. the understated profit during the preparation of the tax report?

• 45000 AZN
√ 30000 AZN
• 32000 AZN
• 36000 AZN
• 24000 AZN

412. How should the income from the sale of fixed assets be defined for profit tax purposes?
 • The income should not be deemed taxable for profit tax purposes.
• Positive difference between the proceeds from the sale of assets and initial value.
• Negative difference between initial value and depreciation expenses.
• Positive difference between initial value and depreciation expenses.
√ Positive difference between the proceeds from the sale of assets and residual value

413. Company sold its asset having AZN 23,450 residual value for AZN 27,000. Calculate the profit tax effect in respect of this transaction.

• Not taxable
√ 710 AZN
• 930 AZN
• 1010 AZN
• 820 AZN

The residual values of the fixed assets for the beginning of the year 20XX are as below:
Office Building AZN 95,000
Printer AZN 1,200
414. Machines used for productionAZN 120,000
Toyota CamryAZN 35,000

Please find total depreciation expenses to be deducted from the revenue in the year of 20XX.

• 31350 AZN
• 38500 AZN
• 30550 AZN
• 33740 AZN
√ 39640 AZN

Residual value of the car is AZN 35.000 for the end of the year 2019. Total repair expenses incurred for this transport in year 2020 is
415. AZN 2.350. Which part of repair expenses should be capitalized into the fixed asset?

• 800 AZN
• 900 AZN
• Whole amount
√ 600 AZN
• 1100 AZN

The resident company made a payment to a non-resident company without PE in Azerbaijan in connection with the freight services. The
416. paid amount after withholding tax is AZN 18,800. Calculate the withholding tax to be paid to the state budget in respect of this service.

• 23000 AZN
• 22800 AZN
√ 20000 AZN
• 21800 AZN
• 21000 AZN

During the on-site tax audit, it was detected that the Company understated its WHT liabilities in the amount of AZN 14.000 for the 4th
417. quarter of 20XX. Calculate the total payable amount in connection with the aforesaid incompliance. Do not take late payment interest
into account.

• 14000 AZN
• 7000 AZN
• 32000 AZN
√ 21000 AZN
• 28000 AZN

418. What is the annual depreciation rate for equipment?

• 0.07
√ 0.20
• 0.08
• 0.14
 • 0.04

419. What is the annual depreciation rate for buildings?

• 0.25
• 0.18
• 0.22
• 0.20
√ 0.07

420. How the part of business trip expenses exceeding established norms deducted from Income?

• Deducted as operational expenses in the month when incurred

• In installments calculated as 1/3 per month
√ Not deducted
• In installments calculated as 1/4 per month
• Capitalized and depreciated

421. When an expense should be recognized if the taxpayer works under cash method?

• When an act of acceptance of the works is signed

√ When the expense is actually paid
• On the day of conclusion of a contract for delivery of goods
• On the day of registration as a taxpayer
• When the income is credited to the bank account

422. When revenue should be recognized if the taxpayer works under accrual method and renders services under a contract?

• When the funds are credited to the bank account

√ When the services are accomplished
• On the day of conclusion of a contract for delivery of goods
• On the day of registration as a taxpayer
• When 75% of the services is accomplished

423. Who are the taxpayers of Profit Tax?

• Resident legal entities only

√ Resident and non resident legal entities
• Branches of foreign legal entities and non resident individuals
• Resident physical and legal persons
• Permanent establishments of foreign legal entities

424. Which of the below is an income of an individual from entrepreneurial activities?

• Bonus paid by an employer

√ Gain from sale of an asset used in entrepreneurial activity
• Interest on deposit in a bank
• Dividend from participation in a legal entities capital
• Meal expenses paid by employer

425. Which of the below is an income of an individual from entrepreneurial activities?

• Bonus paid by an employer

√ Income from operating a shop
• Interest on deposit in a bank
• Dividend from participation in a legal entities capital
• Meal expenses paid by employer

426. Which of the below is not an income of an individual from entrepreneurial activities?
 • Income from rendering personal services
√ Salary
• Income from operating a retail shop
• Income from independent personal activities of a photographer
• Gain from sale of an asset used in entrepreneurial activity

427. Which of the following is an income of an individual from entrepreneurial activities?

• Bonus paid by an employer

√ Income from rendering personal services
• Interest on deposit in a bank
• Dividend from participation in a legal entities capital
• Meal expenses paid by employer

428. Which of the following is not an employment Income?

• Forgiveness of a debt to employee by the employer

√ Dividend
• Income from investments in securities abroad
• Income from leasing of an apartment
• Gifts received by an employee from the employer

429. In which of the following cases a taxpayer cannot be found guilty in violation of tax legislation?

• Was abroad
√ Not reached the age for being legally charged
• Forgot about deadlines
• Did not have any taxable operations in the last month
• Did not get any notification

430. In which of the following cases a taxpayer cannot be held responsible for a violation of tax legislation?

• Was abroad
√ Followed written instruction of the tax authorities
• Forgot about deadlines
• Did not have any taxable operations in the last month
• Did not get any notification

431. When a notification sent to a taxpayer considered as delivered if it was sent through the electronic cabinet of the taxpayer?

• 6 workdays after sending

• Same day
√ 3 workdays after sending
• 5 workdays after sending
• 1 workday after sending

If a transaction was in a foreign currency which exchange rate will be used for calculation of taxes from that transaction in Azerbaijani
432. manats?

• Central Bank published rate for the previous date before the transaction
√ Central Bank published rate for the date of transaction
• Annual average of the rates published by the Central Bank for the year of transaction
• Monthly average of the rates published by the Central Bank for the month of transaction
• Central Bank published rate for the next day after the transaction

Which of the following circumstances may serve as a basis for extension of the deadline for payment of taxes subject to the consent of
433. the tax authority?

• Audit report is not valid

√ Danger of bankruptcy in case of one time payment
 • It is only the first year of activity of the taxpayer
• Taxpayer is not registered for VAT purpose
• Taxpayer is abroad

Which of the following circumstances may serve as a basis for extension of the deadline for payment of taxes subject to the consent of
434. the tax authority?

• Audit report is not valid

√ Natural disaster
• It is only the first year of activity of the taxpayer
• Taxpayer is not registered for VAT purpose
• Taxpayer is abroad

435. How long is the period after the end of the reporting period during which a tax authority may recalculate taxes for that period?

• 1 year
√ 3 years
• 5 years
• 6 months
• 2 years

436. What is the reporting period for VAT?

√ Month
• 18 months
• Quarter
• Year
• 6 months

437. What is the required period during which a taxpayer must maintain all accounting records?

• 2 years
√ 5 years
• 3 years
• 10 years
• 1 year

438. What happens if a taxpayer disagrees and refuses to sign the final audit report?

• Audit report is not valid

√ It is noted on the audit report
• Higher tax authority decides
• Police is involved
• New audit should be carried out

439. Which of the following may serve as a basis for an inventory count during a tax audit?

• Taxpayer is a payer of simplified tax

√ Unlabeled goods subject to mandatory labeling found at taxpayer's premises
• Taxpayer is the subject of micro-entrepreneurship
• Taxpayer acts under a special regime
• Taxpayer is a payer of VAT

440. If a tax authority launches and on-site audit on 6 June 2020, which years may be audited for the purpose of profit tax?

• 2016, 2017, 2018

√ 2017, 2018, 2019
• 2018 only
• 2019 only
• 2018, 2019, 2020
441. If a tax authority launches and on-site audit on 25 April 2020, which years may be audited for the purpose of profit tax?

• 2018, 2019, 2020

• 2018 only
• 2019 only
• 2016, 2017, 2018
√ 2017, 2018, 2019

442. If a tax authority launches and on-site audit on 20 February 2020, which years may be audited for the purpose of profit tax?

• 2017, 2018, 2019

√ 2016, 2017, 2018
• 2018 only
• 2019 only
• 2018, 2019, 2020

443. Which reponsibility does a taxpayer bear if independently fixes the errors in the tax return before an on-site tax audit?

• Financial sanction only

√ Late payment interest only
• Suspension of registration
• Block of electronic cabinet until audit of new tax return is finished
• Late payment interest and financial sanction

444. Based on which document a foreign national individual or a stateless person may be registered as an individual taxpayer in Azerbaijan?

• Driving license
• Document confirming the rent of an apartment
• Passport
• Airline ticket
√ ID issued by migration authorities

445. Which one of the following falls under the definition of "financial services"?

• Service for secure transportation of daily cash proceeds from shop to the bank
• Transfer of winnings from betting by the organizer of betting games
• Service of a security company on protection of companies' cash
√ Granting funds for financial leasing
• Granting salary cards to employees by their employers

446. Which one of the following falls under the definition of "royalty"?

• Payment for rented office premises

• Payment for the right to participate at a conference
√ Payment for use of patent owned by another company
• Representative expenses paid to the director
• Payment to an employee for using his house as a warehouse

447. Which one of the following falls under the definition of "fixed asset"?

• Raw material for production costing 40.000 AZN

• Shares owned in another company
• Software license costing 185 AZN for 3 years
√ An equipment with the value of 1000 AZN and useful life of 2 years
• A scaner costing 250 AZN with useful life of 3 years

448. In which bank a taxpayer may open an account based on a certificate-duplicate issued by a tax authority?

• Any bank with state participation

 • Any bank of the district of residency
• Any bank in Azerbaijan
√ In the bank mentioned on the Certificate-duplicate
• Any bank in the area where the company is located

449. Which of the following may serve as a basis for launching of an unscheduled tax audit?

• Information from anonymous source

• Shifting by taxpayer from VAT to simplified tax method
• Lenghty illness of taxpayer
• Technical problem in POS terminal
√ Last audit's results

450. Which of the following can be controlled during an operative control measure?

• Length of the workday of the employees

• Payment of salaries on time
√ Compliance with regulation on receiving cash payments
• Balance on bank accounts
• Tax return for last period of activity

451. Which of the following may serve as a basis for launching of an unscheduled tax audit?

• Non-provision of documents in response to unlawful request of tax authorities

√ Non-provision of documents in response to lawful request of tax authorities
• In case of anonymous information on tax evasion
• In case taxpayer submits an adjusted tax return
• No show to the tax office when invited

452. In which of the following cases a tax audit may cover a period longer than three years?

• If taxpayer taxpayer did not submit tax returns for more than three years
√ If it is related with an offence constituting a crime
• If the taxpayer is liquidated
• If audit relates to VAT only
• In any case

453. How many years of activities of a taxpayer may be covered by an ordinary on-site audit?

• 5
√ 3
• 1
• 2
• 7

454. How many days does a tax authority have for desk audit of a tax return from the day when it was submitted?

• 20
√ 30
• 10
• 45
• 15

455. Financial sanction for understatement of the amount of tax in the tax return is

• 15% of unreported amount

√ 50% of unreported amount
• 20% of unreported amount
• 30% of unreported amount
• 25% of unreported amount
456. In which of the following cases a financial sanction applies?

• Overpayment of tax
√ Understatement of taxes in tax returns
• Non payment of bank charges on time
• Not opening of bank account within 10 days after the date of certificate-duplicate
• Non payment of rental fee on time

457. Which one of the following has to withhold a tax from payments they make?

• A person buying electronic services on internet

√ Taxpayer paying royalties abroad
• A person plating betting games on internet
• A peron who pays interest for bank credit to a local bank
• A person paying for rent of hotel room abroad

458. When should a resident individual receiving income from abroad apply for tax registration?

• On the date when foreign income repatriated to Azerbaijan

√ On the date whe a right to the income arises
• On the day of opening of a bank account
• 31 March
• On the day of notification from tax authority

459. Which one of the following has to withhold a tax?

• Individual employed in Oil sector

√ Private entrepreneur
• Individual employed in public entity
• Taxi driver
• Individual employed in non-Oil sector

460. Which of the following has to submit a tax return?

• A person engaged in ground transportation of passengers by his own motor vehicle

• Non-resident individual rendering services online to Azerbaijani residents
• An individual shoe repairer
√ Resident legal entity
• Employee of a company from oil and gas sector

461. Which one of the following can be treated as a dividend?

• Distribution of gross profit to shareholders

√ Distribution of net profit to shareholders
• Payments to the members of supervisory board who are not shareholders
• Issuance of new shares and their proportional distribution among existing shareholders
• Bonus payments to the director of the company

462. How the term "taxpayer" is defined?

• A person who is obliged to calculate, withhold and transfer tax to the budget
√ A person who is obliged to pay taxes from the objects defined in the Tax Code
• A person who receives any income
• A person who is obliged to file tax returns
• A person who has been registered as a taxpayer and obtained TIN

463. How the property tax debts of a deseaced person are settled?

• Half of the tax is written off, and half paid by heirs

 √ By heirs proportionally to the value of their respective shares of inherited property
• Paid by close family members
• Paid by the last employer
• Paid by immediate relatives

464. In which of the following circumstances the tax liability is considered fulfilled?

• Half of the accrued tax has been paid

√ All due amounts are paid in full
• Taxpayer requests a tax holiday for one year
• Taxpayer has not received money for the goods sold to customers
• Taxpayer dies

465. When should a private entrepreneur apply for tax registration?

• Within 3 days after starting commercial activities

√ Before starting commercial activities
• Within 5 days after starting commercial activities
• Within 15 days after starting commercial activities
• Within 10 days after starting commercial activities

Which of the below mentioned authorities has a right to access the information containing a tax secret for the performance of its
466. functions?

• Parliament
√ Ministry of Finance
• Ministry of agriculture if agricultural product producers are concerned
• Cabinet of Ministers
• Ministry of Foreign Affairs

467. Which type of information is not considered a tax secret?

• Number of employees
• Turnover during month
√ TIN
• Director's salary
• Shareholders

468. Which type of information is considered a tax secret?

• Applied financial sanctions

• TIN
• Tax debts
• Address
√ Turnover during month

469. How many days before the start of an ordinary field audit the tax authority has to send a notification to the taxpayer?

• 3 days
√ 15 days
• 5 days
• 10 days
• No notification should be sent

470. Which one of the below is a type of tax audit?

• Internal audit
• Operative audit
√ Desk audit
• Teleaudit
 • Chronometrage

471. Which one of the below is defined as a duty of the tax authority?

• To fill the tax return on behalf of the taxpayer if taxpayer is unaware of the deadlines
• Not to calculate financial sanction if taxpayer is absent from the country
• To protect the taxpayer from unlawful claims of the banks
√ Keep the state registry of the commercial legal entities
• To fill the tax return on behalf of the taxpayer if there is a risk of missing deadlines

472. Which one of the below is defined as a right of the tax authority?

• Recalculate taxes for all the period of activities of the taxpayer

• Not to accept tax returns sent via ordinary post service
• Not to accept tax returns sent after the deadline
√ To carry out tax audits based on a properly approved decision
• To start an audit immediately if a potential fraud is suspected not waiting for any formal decision

473. Which one of the below is defined as a duty of the taxpayer?

• To come to the tax office at any time when requested

• To agree with all conclusions of the tax audit
• To provide all documents for inspection by the tax authorities at any occasion if requested
• To follow any requirement of the tax authority
√ To provide all documents for inspection by the tax authorities if so required by law

474. Which one of the below is defined as a right of the taxpayer?

• Not to let tax inspectors to enter the office if busy

• To follow lawful instructions of the tax authority
• To follow unlawful instructions of the tax authority
• Not to pay 50% of calculated taxes if intends to pay double amount in next year
√ Not to follow unlawful instructions of the tax authority

475. What is tax liability?

• To pay taxes only in AZN

• Reporting by an employee of taxes understated in returns by the employer
• To know all tax laws in full
• To pay at least 50.000 AZN of taxes each year
√ To pay lawfully established taxes in full and due time

476. Which one of the following is a state tax?

• Land Tax of Legal Individuals

• Property tax of individuals
• Social Security Contribution
√ Value Added Tax
• Minig tax on building materials of local importance

477. Which one of the following is a municipal tax?

• Unemployment insurance payment

• Value Added Tax
• Social Security Contribution
• Profit Tax
√ Property tax of individuals

478. If a general insurance contract is effected when there is no insurable interest:

 • it is voidable at the option of the insured
• it is voidable at the option of insurers
• the policy is void from the date when this is subsequently discovered
√ it is void ab initio

479. ………….is an expert in dealing with claims, appointed by an insured to assist in presenting the insured’s claim.

√ Loss assessor
• Underwriter
• Loss Adjuster
• Actuary

A large haulage company decides to buy third party only motor cover for their fleet of vehicles and makes provision for any damage to
480. their own vehicles to be repaired through their own vehicle maintenance workshops. This is an example of:

• Risk sharing
• Dual insurance
• Co-insurance
√ Self-insurance

481. In which of the following circumstances is an insurer most likely to invoke the cancellation condition in a household policy?

√ If the insured moves to a postcode area which is prone to flooding

• If the insured advises them that they will be away on a cruise for 2 months
• If the insurers increase their rates for household insurance due to an adverse claims experience on their household account
• If insurers suspect a claim is fraudulent

482. One of the duties of an agent to their principal is a duty of good faith. This means that:

• They must account to the principal for all money they receive on their behalf
√ They must not allow their own interests to conflict with their duties towards their principal
• They must exercise due care and skill in the performance of all acts done in the course of their duties as agent
• They must not delegate the duties imposed on them by the agency to someone else

Imran has arranged a travel policy for his summer holiday in Spain, which includes cover for baggage and personal effects. He also has
483. a household policy which includes “all risks” cover for personal possessions whilst anywhere in Europe. This is an example of:

√ Dual insurance
• Reinsurance
• Co-insurance
• Self-insurance

The cancellation condition in a general insurance policy requires giving a return premium to the insured if the insurer cancels the policy
484. mid term. On what basis does it say the return premium should be calculated?

• A pro rata return premium should be given

• The return premium should be 50% of the annual premium
√ A full return premium must be given
• The return premium should be based on short period rates

485. Which of the following is an example of a non financial risk?

• The loss of business profits following a fire

• The cost of repairing damage to property following a hurricane
• The value of damages to be awarded for the loss of a leg
√ The sentimental value of a family heirloom

486. Which of the following is an example of a bailee?

• A shareholder
 • A joint owner of property
√ A watch repairer
• A mortgage company

487. Which principle seeks to establish main peril caused a loss?

• Insurable interest
• Contribution
• Subrogation
√ Proximate cause

Kanan has arranged a travel policy for his summer holiday in Spain, which includes cover for baggage and personal effects. He also has
488. a household policy which includes “all risks” cover for personal possessions whilst anywhere in Europe. This is an example of:

√ Dual insurance
• Reinsurance
• Self-insurance
• Co-insurance

Where a policy allows the insured to cancel a policy midterm without any reason, on what basis does it most commonly say any return
489. should be calculated?

• A full return premium must be given

• No return premium is allowable
• The return premium should be based on short period rates
√ A pro rata return premium should be given

490. What includes in hull policy for marine insurance?

• the sum paid for transporting goods or for vessel hire

• the goods, property and merchandise carried by a ship
√ the ship, its machinery and equipment
• only equipment

491. Identify one type of property insurance?

√ Engineering/breakdown
• Legal expenses
• Employer’s liability
• Credit

492. Identify one type of property insurance?

√ Theft
• Employer’s liability
• Legal expenses
• Credit

493. Identify one type of pecuniary insurance?

√ Business Interruption
• Motor Insurance
• Professional Indemnity
• Public Liabilty

494. Which is not the component of risk?

• Peril
• Hazard
√ Deliberate act
 • Uncertainty

495. Within the Co-insurance type is it possible to share risk with insured?

√ It is possible
• It is impossible
• Never
• No

496. If one subject matterof insurance is insured by one company with two different policies, we will call this type of insurance as....

• Reinsurance
• Co-insurance
• Self-insurance
√ Dual Insurance

497. Which is not the component of risk?

• Uncertainty
• Peril
√ Homogenous exposures
• Hazard

498. Find one of the types of risk sharing

• insurance
• dual-insurance
• self-insurance
√ co-insurance

499. Find components of risk.

• Homogenous exposures
• Fundamental
√ Severity
• Insurable interest

500. Find components of risk.

• Insurable interest
• Fundamental
• Homogenous exposures
√ Uncertainty

501. Which type of risk cannot be insured?

• Homogenous exposures
• Fortuitous event
√ No insurable interest
• Insurable Interest

502. Which type of risk cannot be insured?

√ Deliberate act
• Fortuitous event
• Insurable Interest
• Homogenous exposures

503. Which type of risk cannot be insured?

 • Homogenous exposures
• Fortuitous event
√ One-offs
• Insurable Interest

504. Choose one of the functions of risk management.

• Risk managing
• Risk transfering
√ Risk control
• Risk calling

505. Choose one of the functions of risk management.

• Risk calling
• Risk managing
√ Risk analysis
• Risk transfering

506. Choose one of the functions of risk management.

• Risk transfering
• Risk calling
• Risk managing
√ Risk Identification

507. How we can call people like risk?

• Risk-averse people
• Risk-managing people
√ Risk-seeking people
• Risk-finder people

508. How we can call people don’t like risk?

• Risk-seeking people
• Risk-managing people
√ Risk-averse people
• Risk-finder people

The sum insured is 270 000 azn under the policy, whereas the insurance premium is 810 azn. Identify the insurance tariff under the
509. policy.

• 0.50%
• 0.70%
√ 0.30%
• 0.40%

510. If a legal entity wants to hold insurance activity, to which organisation it has to apply to get license for insurance activity?

• Cabinet of Ministers
• Ministry of Internal Affairs
• Parliament
√ Central Bank

511. Which of the following is not an essential feature for insurable interest to exist?

√ anticipated insurable interest

• a legal relationship
• a financial relationship
 • the subject matter of insurance

Where the cancellation of a household policy requested by the insured and the household certificate has been lost, which of the
512. following documents is most commonly requested by insurers?

√ A statutory declaration
• The policy schedule
• A lost certificate declaration
• The policy document

513. Which type of risk is uninsurable?

• Risk related with particular issue

• Risk related with financial issue
√ Risk related with non-financial issue
• A pure risk

514. Which principle obliges a proposer of an insurance policy to disclose relevant moral facts?

• The principleof subrogation

• The principleof insurable interest
√ The principle of utmost good faith
• The principleof contribution

Travel insurance policies cover damage caused by car accident impact. In relation to frequency and severity how would you describe
515. this type of event?

• High frequency, high severity

√ High frequency, low severity
• Low severity, low frequency
• High severity, low frequency

John and Edward have bought a property together which would cost 400.000 euro to rebuild. John owns 25% of the property and
516. Edward 75%. For how much is John legally entitled to insure the property on a reinstatement basis.

• Nil
• 300.000 euro
• 400.000 euro
√ 100.000 euro

Insurance value of the subject-matter of insurance is 4 000 AZN, whereas the sum insured is 2 000 azn, unconditional deductible is 250
517. azn. The insured suffered loss equivalent to 1 000 azn upon the event insured. Identify the insurance payment to be paid under the event
insured.

• 500
√ 250
• 1000
• 1500

House insurance policies cover damage caused by flood impact. In relation to frequency and severity how would you describe this type
518. of event?

• High frequency, low severity

• High frequency, high severity
• Low severity, low frequency
√ High severity, low frequency

The unconditional deductible is 300 azn under the policy. The insured suffered loss equivalent to 300 azn upon the event insured.
519. Identify the amount of insurance payment to be paid under the event insured.

• 1000
√ 0
 • 750
• 500

520. The sum insured is 5 0000 azn under the policy, whereas the tariff is 1, 5 per cent. Identify the insurance premium under the policy.

• 450
• 650
• 500
√ 750

521. ……… is an insurer’s right to

• Subrogation; Take on the duties of the insured against a third party

• Subrogation; Take on the duties of the insurer against a third party
• Contribution; Take on the rights and remedies of the insurer against a third party
√ Subrogation; Take on the rights and remedies of the insured against a third party

522. Which principle obliges a seller of an insurance policy to disclose relevant material facts?

• Insurable interest
• Subrogation
• Contribution
√ Utmost good faith

523. Which principle obliges a buyer of an insurance policy to disclose relevant material facts?

• Subrogation
• Insurable interest
√ Utmost good faith
• Contribution

524. The main function of insurance is to …………. risk

• Assessment
√ Transfer
• Elimination
• Identification

525. Identify the main function of insurance

• Identification risk
• Assessment risk
√ Transfer risk
• Elimination risk

The conditional deductible is 750 azn under the policy. The insured suffered loss equivalent to 750 azn upon the event insured. Identify
526. the amount of insurance payment to be paid upon the event insured.

• 250
• 750
√ 0
• 500

527. Find an uninsurable risk?

• A financial risk
√ A non-financial risk
• A pure risk
• A particular risk
 Aydan has a house which price is 600 000 $. Tom has insured his house with two different insurers. The policy with Insurer A covers
buildings only and has a sum insured of 300 000 $. The policy with Insurer B has a buildings sum insured of 300 000$ and contents sum
528. insured of 30 000$. A fire breaks out and causes damage to the buildings and contents which will cost 180 000$ and 15 000$
respectively to repair. How much will insurer B pay?

• 102 000 $
• 15000 $
• 115 000 $
√ 105 000 $

The sum insured is 32 00 azn under the policy, whereas the insurance premium is 1 28 azn. Identify the insurance tariff in percentage
529. terms.

√ 4.00%
• 2.5%
• 2.00%
• 1.5%

530. Which principle seeks to establish which the main event caused a loss?

√ Proximate cause
• Insurable interest
• Subrogation
• Contribution

Insurance value of the subject-matter of insurance is 30 000 AZN, whereas the conditional deductible is 300 azn. The insured suffered
531. loss equivalent to 1800 azn upon the event insured, whereas the amount of insurance payment is equivalent to 1440 azn. Identify the the
sum insured in azn under the policy.

• 26000
• 30000
√ 24000
• 25000

Insurance value of the subject-matter of insurance is 40 000 AZN, whereas the sum insured is 30 000 azn and conditional deductible is
532. 1500 azn. The insured suffered loss equivalent to 10 000 azn upon the event insured. Identify the amount of insurance payment to be
paid upon the event insured.

• 7000
• 8000
√ 7500
• 8500

533. The sum insured is 80 000 azn under the policy. Whereas the tariff is 0, 7 per cent. Identify the insurance premium under the policy.

• 6500
• 5600
√ 560
• 650

534. The sum insured is 4 000 azn under the policy. Whereas the tariff is 7 per cent. Identify the insurance premium under the policy.

• 140
• 28
√ 280
• 14

Jason has taken out two policies to insure his factory against fire, one with ABC Ltd for a sum insured of 20 000euro and another for
535. 30 000 euro with XYZ Ltd. There is a fire causing a total loss amounting to 30 000 euro. Assuming no unusual terms and that the claim
is valid under both policies, how much will ABC Ltd pay?

• 15 000 euro
 • 18 000 euro
√ 12 000 euro
• 20 000 euro

536. Which principle obliges a proposer of an insurance policy to disclose relevant material facts?

• Subrogation
• Contribution
√ Utmost good faith
• Insurable interest

537. The primary function of insurance is as a means of risk

• Identification
• Elimination
√ Transfer
• Assessment

538. Which type of risk is not insurable?

• A financial risk
• A particular risk
√ A non-financial risk
• A pure risk

Insurance value of the subject-matter of insurance is 40 000 AZN, whereas the sum insured is 30 000 azn and conditional deductible is
539. 500 azn. The insured suffered loss equivalent to 10 000 azn upon the event insured. Identify the amount of insurance payment to be
paid upon the event insured.

• 8000
• 8500
√ 7500
• 7000

540. The sum insured is 20 000 azn under the policy. Whereas the tariff is 0, 3 per cent. Identify the insurance premium under the policy.

• 45
• 74
√ 60
• 54

Insurance value of the subject-matter of insurance is 10 000 AZN, whereas the sum insured is 5 000 azn and conditional deductible is
541. 500 azn. The insured suffered loss equivalent to 2 000 azn upon the event insured. Identify the amount of insurance payment to be paid
upon the event insured.

• 500AZN
• 2000 AZN
√ 1000AZN
• 1500 AZN

Motor insurance policies cover damage caused by animal impact. In relation to frequency and severity how would you describe this type
542. of event?

• High severity, low frequency

• High frequency, low severity
√ Low severity, low frequency
• High frequency, high severity

House insurance policies cover damage caused by aircraft impact. In relation to frequency and severity how would you describe this
543. type of event?
 • Low severity, low frequency
• High frequency, low severity
√ High severity, low frequency
• High frequency, high severity

A risk is insured by more than one insurer. In the event of a claim, each insurer is only responsible to the insured for its proportion of
544. the loss. This is known as

• Dual insurance
• Pooled insurance
√ Coinsurance
• Reinsurance

The unconditional deductible is 500 azn under the policy. The insured suffered loss equivalent to 500 azn upon the event insured.
545. Identify the amount of insurance payment to be paid under the event insured.

• 750
• 500
√ 0
• 1000

546. The sum insured is 5 000 azn under the policy, whereas the tariff is 1, 5 per cent. Identify the insurance premium under the policy.

• 50
• 65
√ 75
• 45

547. Who pays the fees of a loss assessor?

• The insurer
• They are shared between the insured and the insurer
√ The insured
• The negligent third party

Insurance value of the subject-matter of insurance is 57 000 AZN, whereas the unconditional deductible is 1 000 azn. The insured
548. suffered loss equivalent to 12 500 azn upon the event insured, whereas the insurance payment is 11 500 azn. Identify the amount of the
sum insured under the policy.

• 33000
• 75000
√ 57000
• 43000

549. Which type of risk is insurable?

• A speculative risk
• A fundamental risk
√ A particular risk
• A non-financial risk

550. Which type of risk is uninsurable?

• A financial risk
• A particular risk
√ A non-financial risk
• A pure risk

551. Which principle seeks to establish which peril caused a loss?

• Subrogation
 • Contribution
√ Proximate cause
• Insurable interest

552. Where a loss results from a chain of events, the proximate cause of the loss is always:

• The event which is covered by the policy

• The only event which contributed to the loss
√ The dominant event linking directly to the loss
• The final event before the loss occurred

553. The sum insured is 18 000 azn under the policy. Whereas the tariff is 0, 3 per cent. Identify the insurance premium under the policy.

• 74
• 45
√ 54
• 64

Where a policy allows the insured to cancel a policy mid-term, on what basis does it most commonly say any return should be
554. calculated?

• No return premium is allowable

• The return premium should be based on short period rates
√ A pro rata return premium should be given
• A full return premium must be given

555. The highest duty of insurer in front of the insured is…………

• insurance payment
• insurance premium
√ insurance sum
• insurable interest

………..is the insured’s financial interest in the subject-matter of insurance. A policy where the insured is without such interest is
556. unenforceable

• Insurance premium
• Insurance sum
√ Insurable interest
• Insurance payment

557. Choose one of the buyers of insurance?

• Proprietary companies
• Captive insurance companies
√ Public bodies
• Mutual companies

558. Choose one of the sellers of insurance?

• Private individuals
• Partnerships
• Public bodies
√ Proprietary companies

……….. is an expert in processing insurance claims from start to finish. Appointed by an insurer but independent from both insured and
559. insurer

√ Loss Adjuster
• Underwriter
 • Loss assessor
• Actuary

560. Find a non financial risk.

• The cost of repairing damage to property following a hurricane

√ The sentimental value of a family heirloom
• The loss of business profits following a fire
• The value of damages to be awarded for the loss of a leg

561. One of the following is an example of a short term contract?

• Personal accident insurance

• Household insurance
• Motor insurance
√ Business trip insurance

562. The term “Subrogation” is………..

is the right of an insurer, following the payment of a claim, to take over the insured’s rights to recover payment from a second party
• responsible for the loss. Limited to the amount paid out under the policy.
is the duty of an insurer, following the payment of a claim, to take over the insured’s rights to recover payment from a third party
• responsible for the loss. Limited to the amount paid out under the policy.
√ is the right of an insurer, following the payment of a claim, to take over the insured’s rights to recover payment from a third party
responsible for the loss. Limited to the amount paid out under the policy.
is the right of an insured, following the payment of a claim, to take over the insured’s rights to recover payment from a third party
• responsible for the loss. Limited to the amount paid out under the policy.

………….is the right of an insurer, following the payment of a claim, to take over the insured’s rights to recover payment from a third
563. party responsible for the loss. Limited to the amount paid out under the policy.

• Peril
• Hazard
• Principle of contribution
√ Principle of subrogation

Esma buys a house for 400.000 euro with a mortgage of 300.000 euro from the AH Bank. What is the extent of the Helpful Bank’s
564. insurable interest in Esma’s property?

√ 300.000 euro
• Nil
• 50.000 euro
• 400.000 euro

565. Which of the following is an example of a bailee?

• A shareholder
• A mortgage company
√ A car repairer
• A joint owner of property

566. When must insurable interest exist for an Doctor’s Liability policy to be valid?

√ at inception only
• both at inception and at the time of any claim
• at inception or within a reasonable time of inception only
• only at the time of a claim

567. Which of the following does not fall into the category of a buyer of insurance?

• A public body
 √ A mutual association
• A club
• A partnership

568. ………….is an expert in dealing with claims, appointed by an insurer to assist in presenting the insurer’s claim.

• Actuary
• Loss assessor
• Underwriter
√ Loss Adjuster

Leysan and Edison have bought a property together which would cost 600.000 euro to rebuild. Leysan owns 25% of the property and
569. Edison 75%. For how much is Edison legally entitled to insure the property.

• 100.000 euro
√ 600.000 euro
• 0 euro
• 450.000 euro

570. Choose the right definition of the term “An excess”

• Money paid by the insured to insurer

• Compensation paid by the insurer to the insured when, insurance accident happens
• the highest duty of insurer in front of the insured
√ the first amount of each claim which is not covered by the policy and is borne by the insured

Where the cancellation of a motor policy requested by the insured and the motor certificate has been lost, which of the following
571. documents is most commonly requested by insurers?

• The policy schedule

• The policy document
√ A statutory declaration
• A lost certificate declaration

572. Which of the following is an example of a short period contract?

• Private medical insurance

• Household insurance
√ Travel insurance
• Personal accident insurance

573. Which of the following is an example of a bailee?

• A joint owner of property

√ A shoe repairer
• A mortgage company
• A shareholder

574. When must insurable interest exist for an Employer’s Liability policy to be valid?

• at inception or within a reasonable time of inception only

√ at inception only
• only at the time of a claim
• both at inception and at the time of any claim

The International Trading Company have a property insurance policy with ABC Insurers. ABC insurers have arranged reinsurance for
575. 50 % of the risk. If a valid claim is made by the International Trading Company for 10.000 euro, how will this be paid?

• ABC insurers and the reinsurers will each pay 5.000 euro to the International Trading Company
• ABC Insurers will pay 10.000 euro to the International Trading Company and will not be able to recover any money from the reinsurers
 • The reinsurers will pay 10.000 euro to the International Trading Company and recover 5.000 euro from the ABC Insurers
√ ABC Insurers will pay 10.000 euro to the International Trading Company and recover 5.000 euro from the reinsurers

576. Which of the following is not a valid way in which an agency may be terminated?

• Mutual agreement
• Bankruptcy
√ Apparent authority
• Insanity

577. A large retail bank decides to self-insure the first 50.000 euro of any property losses. The amount self-insured is called:

• The acceptance limit

√ The insured’s retention
• The policy excess
• The co-insurance