CAIIB Sample Question Paper : INDIAN INSTITUTE OF BANKING & FINANCE, IIBF

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SUBJECT-RISK MANAGEMENT
1. Net Interest income is
a) Interest earned on advances
b) Interest earned on investments
c) Total interest earned on advances and investment
d) Difference between interest earned and interest paid (d)
2. Interest rate risk is a type of
a) Credit risk
b) Market risk
c) Operational risk
d) All the above (b)
3. European option can be exercised on any day at the option of the buyer
on or before the expiry of the option.
a) True B) False (b)
4. If the volatility per annum is 25% and the number of trading days per
annum is 252, find the volatility per day.
a) 1.58%
b) 15.8%
c) 158%
d) 0.10 (a)
5. The June 1999 Basle Committee on Banking Supervision issued
proposals for reform of its 1988 Capital Accord (the Basle II Proposals).
These proposals contained MAINLY.
I) Settlement risk management
II) Capital requirements
III) Supervisory review
IV) The handling of hedge funds
V) Contingency plans
VI) Market discipline

(a) I,III and VI (d)
(b) II, IV and V
(c) I,IV and V
(d) II, III and VI

Case Study – I
You are working as a Middle Level Executive with ‘Modern Bank Ltd.,’ The
MIS Department has submitted the following Statistics from which you are
required to estimate the likely Capital Funds required by the Bank as of March,
31st, 2007 taking into account the Basel II implementation compliance.
i) Risk-Weighted Assets for Credit Risk likely to be Rs.53,889.50 crores
ii) Capital Allocation for Market Risk to be Rs.100/- crores
iii) For Operational Risk following Data available. The bank is required to
calculate Capital Charge for Operational Risk by Basic Indicator
Approach.

Year 31-03-2004 31-03-2005 31-03-2006
Gross Income 2600.00 3000.00 3400.00
(Amount in Crore)
Note: Capital Adequacy prescription applicable to Indian Banks has to be
considered for calculation.
Answer the following five questions based on above facts.
6. As per Reserve Bank of India directives the Minimum Capital Adequacy
Ratio and minimum Tier I capital the Modern Bank is required to maintain as
on 31.03.2007 should be ___________ respectively.
a) 8% and 4%
b) 9% and 4.5%
c) 9% and 4.0%
d) 12% and not specified (b)
7. The Basel Committee has defined gross income as net interest income
and plus net non-interest income and has allowed each relevant national
supervisor to define gross income in accordance with the prevailing accounting
practices. Accordingly the Reserve Bank of India in the draft guidelines issued
on 11.03.2005 for implementation of the new capital adequacy framework
has modified the Gross Income definition slightly. The Net Interest Income
has been replaced by
a) Net Profit
b) Operating Profit
c) No Changes made
d) Interest Expended (a)
8. Based on the Gross Income given above, the likely Capital Charge for
Modern Bank Ltd., as on March 31, 2007 to cover Operational Risk under
Basic Indicator Approach shall be
(a) 375 crores
(b) 540 crores
(c) 450 crores
(d) 360 crores (c)
9. The Modern Bank Ltd., will require total Capital Funds for covering
Credit Risk. As on March31,2007 to comply Basel II norms of Rs.________
crores.
a) 5400 crore
b) 4500 crores
c) 4800 crores
d) 4311.16 crores (a)
10. The Modern Bank Ltd., should have minimum of Rs._____ Crores as
Tier I capital at the rate of minimum of _____% respectively as per RBI
guidelines applicable to Indian Banks.
a) 2250.450%
b) 2700,4.50%
c) 2400, 4.00%
d) 2400,8.00% (b)

SUBJECT -FINANCIAL MANAGEMENT
Based on the following information, Answer Questions 1 to 3.
Sales (80% in credit) Rs.14 lakhs, Opening debtors Rs.1,80,000, Discount
Rs.12,000, Bad debt Rs.27,000, Cash and Cheques received Rs.10,80,000,
Cheques dishonoured Rs.7,200 (expected to realise 50% from that debtor).
Closing creditors Rs.1,70,000, Purchases Rs.5 lakhs (25% in cash), Paid to
creditors Rs.3,25,000, Goods returned Rs.15,000.
Cost of goods sold / sales = 75%
Closing stock of finished goods : Rs.1 lakh
Opening stock of finished goods : Rs.0.75 lakh
Assume 1 year = 360 days.
1. The inventory turnover ratio is:
a. 12
b. 24
c. 36
d. None of the above (a)
2. The average collection period is:
a. 60 days
b. 59 days
c. 58 days
d. None of the above (b)
3. The average payment period is:
a. 250 days
b. 256 days
c. 146 days
d. 186 days (c)
4. A firm has an opening of stock of Rs.70,000, Closing stock of Rs.90,000
and Cost of goods sold Rs.2,40,000. What the Inventory Turnover Ratio?
a. 5
b. 4
c. 3
d. 2 (c)

Based on the following information, Answer Questions 5 and 6.
Credit Sales Rs.3,00,000
Opening Balance of Accounts Receivable Rs.40,000
Closing Balance of Accounts Receivable Rs.60,000
Credit Purchases Rs.1,80,000
Opening Balance of Account Payable Rs.20,000
Closing Balance of Accounts Payable Rs.40,000
5. The Debtors’ Turnover Ratio is:
a. 6
b. 8
c. 10
d. 12 (a)
6. The Creditors’ Turnover Ratio is:
a. 8
b. 6
c. 4
d. 2 (b)
7. Wait a minute! Why can’t I simply choose, say, z to be really large
(z=1,000,000 say) and thereby make p as large as I want?
A You can’t because
a) that would make p too large
b) z has a negative coefficient in the first constraint
c) it would violate the first contraint
d) it would violate the second constraint (d)
8. To solve a standard maximization problem using the simplex method,
we take the following steps: which are jumbled. Mark the correct order
of steps.
Step 1: Determine which variable to bring into solution.
Step 2: Determine which variable to replace
8
Step 3: Formulate problem in terms of an objective function and a set of
constraints
Step 4: Update remaining Row values. Compute new z
Step 5: Calculate new row values for entering variable and insert into
new tableau.
Step 6: Set up initial Tableau with slack variables
Step 7: If there is no positive (c-z) value found, the solution is optimum.
If there is a positive value, then iterate again (repeat earlier three steps).
Choose the correct sequence of steps.
a) 3,5,4,5,7,1,2
b) 3,6,2,1,5,4,7
c) 3,6,2,1,4,5,7
d) 3,6,1,2,5,4,7 (d)
Based on the following information, Answer Questions 9 to 10.
MEMBER OF AN INFLUENTIAL ORGANISATION overdraws his
accounts at the following banks: the India Integrity Bank, Citizens’ Trust
Cooperative Bank, and Prudent Money Investment Bank and uses his
organisations allocated Funds. There are no penalties for these withdrawals
since the overdrafts are subsidized by organisation. Ethics Committee of the
organisation tends to let slide irregular banking activities of this sort, provided
they are not flagrant. At the moment a total overdraft of up to Rs.10,000/- will
be overlooked. Ramani’s underlying sense of guilt makes him feel funny about
writing overdrafts for banks whose names include expressions like “integrity”
and “citizens’ trust” and “Prudent”. The effect of this is that his bad cheque
writing for the first two banks combined amounts to no more than one-quarter
of the total. On the other hand, the financial officers at India Integrity Bank
are eager to please Ramani due to his influential position, so they would like
him to overdraw his account by as much as possible. Find the amount he
should draw from each bank in order to avoid investigation by the ethics
committee of the organisation and overdraw his account at India Integrity by
as much as his sense of guilt will allow.
9. Rs................................. from India Integrity Bank.
a) Rs.2,500/-
b) Rs.30,000/-
c) Rs.25,000/-
d) Rs.35,000/- (a)
9
10. Rs................................ from Prudent Money Investment Bank
a) Rs.7,500/-
b) Rs.10,000/-
c) Rs.12,500/-
d) Rs.15,000/- (a)
11. Radhika oil Mill is planning for its cash to be maintained during the
month of August. The manager has analysed the daily cash outgo for
the month of June. Ten longest daily cash outflows are as follows:
June (Rs. in ‘000s)
Date 3rd 7th 10th 12th 15th 16th 18th 22th 26th 28th
Cash 55 40 35 48 23 68 42 33 58 29
Outflow
It is expected that the pattern of cash outflows in the month of June but
the magnitude of cash outflows will be 20% more. If the finance manager
desires sufficient cash to cover payments of 4 peak days during the month
than the safety level of cash to be maintained in the month of AUGUST
would
a) Rs.1,72,400
b) Rs.2,06,880
c) Rs.2,29,000
d) Rs.2,74,800 (d)
12. Which of the following is not a motive for the companies to hold cash?
a) Transaction motive
b) Precautionary motive
c) Lack of proper synchronization between cash inflows and outflows
d) Capital investments (d)
13. VaR menas:
a) Valume of Business at Risk
b) Value at Risk
c) Volume on Risk
d) Value as Risk (b)
14. In an inflationary trend, the pricing of the bank products are:
a) Decreasing trend
b) Constant
c) Increasing trend
d) No relevance (c)
15. Credit Risk Assessment of the borrowal units is for:
a) Assessing the repayment capacity
b) To fix the pricing of the product
c) To review the units performance
d) None of the above (b)
16. Pricing is equals to:
a) Cost of the product
b) Break Even Point of the firm
c) Function of Risk rating
d) All of the above (c)
Based on the following information, Answer Questions 17 to 20.
The following are the data on a capital project being evaluated by the
management of X Ltd.,
Project M
Annual cost saving Rs.40,000
Useful life 4 yeas
I.R.R. 15%
Profitability Index (PI) 1,064
NPV ?
Cost of Capital ?
Cost of Project ?
Salvage value 0
10
Considering the following table of discount factor:
Discount factor 15% 14% 13% 12%
1 Year 0.869 0.877 0.885 0.893
2 Year 0.756 0.769 0.783 0.797
3 Year 0.658 0.675 0.693 0.712
4 Year 0.572 0.592 0.613 0.636
17. The Pay back period of Project of Project M is:
a) 2 year 11 months
b) 2 years 9 months
c) 2 years 12 months
d) None of the above (a)
18. What is the cost of capital of Project M
a) 12%
b) 14%
c) 16%
d) 18% (a)
19. Project-M NPV is:
a) 7,211
b) 7,309
c) 8,014
d) 8,020 (b)
20. Cost of Project M is:
a) 1,14,600
b) 1,14,200
c) 1,14,860
d) 1,14,940 (b)

SUBJECT : GENERAL BANK MANAGEMENT
INSTRUCTIONS:
1. The question paper will have four sections:
Section 1: International Banking
Section 2: Human Resources Management
Section 3: Technology Management
Section 4: Marketing Management
2. Each section will have questions in the following pattern:
Question 1: Five statements will be given with multiple-choice
answers.
Candidates are required to tick the answer, which is True
or False.
Question 2: This will be five concepts/ definitions with multiple-choice
answers.
Candidates are required to tick the answer which is most
appropriate.
Question 3: Five small cases will be given along with the issue involved
therein with multiple choice answers.
Candidates are required to tick answer, which is
considered to be the most appropriate.
Question 4: One real life situation will be narrated and five issues
will be raised thereon with multiple choice answers.
Candidates are required to tick the answers, which are
considered to be the most appropriate.

SECTION 1: INTERNATIONAL BANKING-SAMPLE
QUESTIONS
1. Which of the following statement is correct?
(a) Foreign Exchange markets are localized markets.
(b) Foreign Exchange markets operate within a country’s time zone.
(c) Foreign Exchange markets are dynamic and round the clock markets.
(d) Foreign Exchange markets are used only for trade
related transactions. (c)
Certain statement has been given below. Answer the question as directed
there in.
2. Which of the following definitions is most correct?
UCPDC 500 is :
(a) Set of rules applicable to CC transactions
(b) Set of rule having 500 articles.
(c) Set of rules framed by ICC governing LC business globally .
(d) Set of universally applicable rules governing LC business
in India only. (c)
Read the following situation carefully and tick the answer which is
considered most appropriate on the issue raised there in.
3. If market quotes USD/INR as 43.61/63, at what rate can you buy USD
at the given quote:
(a) 43.61 (b) 43.62 (c) 43.63 (d) None of the above. (c)
4. A correspondent in Japan wants to fund his Vostro account for Rs 10.00
million. At USD/INR at 63.56/57 and JPY at 109.60/70, how much JPY should
the correspondent pay into your Nostro account with him, assuming no margins
are loaded:
(a) 91157.70 (b) 251636 (c) 229515 (d) 251762 (d)
Read the following situation carefully and tick the answer which is
considered most appropriate on the issues raised therein.
In January 2000, Mr Lobo, a resident of Mumbai, was offered a job in Muscat
by a construction company, as Sr. Civil Engineer on a 2 year job contract. He
left India on 15.2.2000, after completing Visa formalities and joined the
company in Muscat on 18.2.2000. His family joined him in May 2000. He
worked with the company till March 2002, and returned back to India bag
and baggage.
In May 2002, he joined a large construction company in Mumbai, which also
undertook large construction projects at overseas centers. He was posted at
one of the local construction sites initially, but in October 2003, he was deputed
to a Hotel construction site in Moscow, by his employers. He stayed in Moscow
for a year, and returned in November 2004 on completion of the project work.
On returning India, he resigned from the company to go to Riyadh for taking
up another job.
He left for Riyadh in December 2004 and got a job with a large company
immediately and continues to be there until now.
He had following accounts in India:
(a) A Savings bank account with XYZ Bank opened in 1998.
(b) A Savings Bank account with XYZ Bank opened in 2000, from the
monies sent from Muscat, used for payment of monthly sustenance to
his old parents in India,
(c) A Term Deposit with a Foreign Bank in India , made out of funds he
received by selling his ancestral property in Goa.
(d) A Term deposit account with an ABC Bank, for USD 5000.00, sent
from Muscat, when he received his annual bonus.
Answer the following questions based on the above facts-
5. What do we call the savings account of Mr. Lobo with XYZ Bank
between the period March 2000 and March 2002.
(a) Ordinary savings account
(b) Resident Rupee account
(c) Non resident Ordinary Rupee account
(d) Non resident External Rupee Account. (c)
6. What do we call the savings account of Mr. Lobo with XYZ Bank, opened
in 2000, until March 2002.
(a) NRNR Account
(b) NRO savings account
(c) NRE savings account
(d) FCNR savings account (c)
7. What was the status of Mr. Lobo, during May 2002 and May 2003
(a) Non resident Indian
(b) Returning resident Indian
(c) Temporary resident Indian
(d) Resident Indian (d)
8. What do we call the Term deposit account of Mr. Lobo with the foreign
bank during his stay in India:.
(a) NRO account
(b) NRE account
(c) Ordinary resident term deposit account
(d) Domestic term deposit account. (d)
9. What do we call the deposit of Mr. Lobo made in US Dollars, when
opened?
(a) NRE USD account
(b) Foreign Currency Resident account
(c) Foreign Currency Non- Resident account
(d) Non –Resident Foreign currency account (c)


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