Unlike the Phase-I’s GA section, which was rather factual, the two papers focusing on Economic and Social Issues && Finance and Management are bound to bend more towards the conceptual side of things. And shouldn’t this be obvious? It will be useless to expect conceptual questions in Phase-I henceforth (as per my understanding) as Phase-II is taking ample care of this aspect. Have a look at the questions below. They have provided a few sample questions based on mathematical calculations and it seems that the onus is upon the aspirant to predict all those topics in Finance upon which mathematical questions can be asked!
Paper-I: Economic and Social Issues (There will be questions carrying 2 marks each and questions carrying 1 mark each)
Q.1-3. Read the following passage and answer the given questions: Data released earlier this year revealed a landmark event for the Indian economy that went largely unnoticed: agricultural workers now comprise less than half the workforce for the first time in the history of the Indian economy and its contribution to GDP is less than 14 percent. However in recent years even as the non-agricultural economy remains weak, overall growth has been propped up to the extent it has by the growth of the overall rural economy. And while within the rural economy itself, non-farm activities are becoming increasingly significant, close to two of three workers depend on agriculture for an important part of their income. Lower production from earlier years, higher cultivation costs and weaker yields bode ill for farm incomes and by extension for the rural economy as a whole. If rural incomes are hit, there could be bigger demand for work under the rural employment guarantee scheme. Though there is a government proposal to restrict MGNREGA to tribal districts only, if farm incomes remain weak this feeds into the rest of the economy and the intention of the government to see this policy through could well be tested.
Q. 1. What do the statistics regarding the agricultural sector cited in the passage indicate?
(1) Farm incomes are likely to be hit by low global commodity prices and weak or stagnant production
(2) Overall agricultural output will fall significantly this year despite sustained government assistance
(3) Factors such as a weak monsoon have resulted in an agricultural deficit
(4) The agricultural sector is very important to the economy despite its falling contribution to India’s GDP
(5) Agriculture must employ more workforce
Q.2. Which of the following is a welcome development?
(1) Bigger demand for work under rural employment guarantee scheme
(2) Non-agricultural economy remaining weak
(3) Agriculture workforce becoming less than half of the total workforce
(4) Higher cultivation costs
(5) Restricting MGNREGA to tribal district
Q.3. Which of the following best defines MGNREGA?
(1) Guaranteeing 100 days of wage-employment in a financial year to every rural household whose adult member volunteer to do skilled work.
(2) Guaranteeing 100 days of wage-employment in a financial year to every rural household whose adult member volunteer to work in farm sector.
(3) Guaranteeing 100 days of wage-employment in a financial year to an adult member of a rural household
(4) Guaranteed regular employment of one adult member in rural areas in a farm or non- farm sector
(5) Fixing minimum wages in the rural areas.
Q.4-5. Read the following paragraph and answer the given questions. The resettlement home, where Velayudhan’s mother was admitted, has limited facilities with one physically challenged old doctor to attend around 200 inmates. There are some nurses deputed by the People’s Council for Social Justice, a not-for-profit organization. The care-home lacks proper provisions, medicines and accessories like bed sheets and cleaning materials. The condition of Velayudhan and his mother suggests a big gap in the much- acclaimed decentralized anti-poverty programmes of the state and local self-governments (LSG), said noted economist Prof K K George. “There is a need to go beyond the BPL and APL categorization. What we need is a micro-level intervention to identify the individual disabilities among the poor and the rich,” he said.
Q.4. While defining the poverty line:
(1) In 1979 based on the report of the Task Force (Y K Alagh) the Government adopted a quantitative measure of poverty by estimating the poverty line corresponding to the calorie requirements.
(2) The Expert Group (Tendulkar) had decided to anchor the poverty line to the then available official calorie norms used in all poverty estimations since 1979.
(3) The Expert Group (Tendulkar) did not use the all-India urban poverty line basket as the reference to derive state-level rural and urban poverty.
(4) The new poverty line worked out by Expert Group (Tendulkar) was, for a family of five, monthly consumption expenditure of Rs.4860 in rural areas and Rs.7035 in urban areas.
(5) The Expert Group (Rangarajan) preferred consumption expenditure estimated based on the National Accounts Statistics as against the estimates arrived by National Sample Survey Organisation.
Q.5. Why do we need to ‘go beyond the BPL and APL categorization’?
(1) We need to provide benefits of anti-poverty programmes to all BPL and APL population
(2) We need to identify only individual disabilities and categorise them to get the benefit of anti-poverty programme
(3) We need to consider individual disabilities to categorise them to get the benefit of anti- poverty programme
(4) Anti-poverty intervention is needed by both BPL and APL and rich
(5) Micro-level intervention is required by local self-governments.
Q.6-7. Read the following paragraph and answer the given questions. The Eighth Five Year Plan (1992-97), was launched keeping in mind the necessity of implementing measures for stabilization and structural adjustment subsequent to the Balance of Payments (BOP) crisis of 1991. The Plan took into account the changes that were to be expected in the economy on account of the adoption of these reform measures, while keeping in mind the poor performance of the economy in the base year,1991-92. In the base year the rate of inflation was in double digits, while the overall growth rate of GDP for that year was negligible.
Q.6. What is the unit of measurement of GDP?
(1) Percentage or proportion
(2) Absolute number of goods and services
(3) Monetary terms (Rupees, Dollars etc.)
(4) Absolute number per capita
(5) Other than those given as options
Q.7. What is the role of Five Year Plans in India?
(1) To control GDP and BOP only
(2) To plan for overall development of different production sectors
(3) To plan for overall development of different production sectors as well as human development
(4) To plan for overall development of the country and approve budgetary allocation
(5) To plan for overall agricultural development of the country and allocate resources
Q.8. According to Socio Economic and Caste Census (SECC) exercise that started in 2011 the total number of households in India are around _____.
(1) 17.39 crore
(2) 19.39 crore
(3) 21.39 crore
(4) 24.39 crore
(5) 27.39 crore
Q.9. Which of the following types of initiatives by the Government cannot be classified as an anti-poverty programme?
(1) Urban poverty alleviation programme
(2) Castes based reservation in jobs
(3) Self-employment programmes
(4) Social Security programmes
(5) Wage employment programme
Q.10. The Millennium Development Goals Report 2015 lists eight Goals numbered as 1 to 8. Which of the following is Not in the Goals 1 to 4 ?
(1) Achieve Universal Primary Education
(2) Eradicate extreme poverty and hunger
(3) Global partnership for development
(4) Reduce chill Mortality
(5) Promote Gender equality and an power women
Q.11. Which one of the following is not a part of ‘Food Based Safety Nets’ in India?
(1) Public distribution System
(2) Mahatma Gandhi National Rural employment Programme (MGNREGS)
(3) Mid-day Meals Programme
(4) Integrated Child Development Programme
(5) Food for Work Programme
Q.12. Self-help groups (SHGs) are generally facilitated by NGOs, and increasingly advise and train members in a variety of on- and off-farm income-generating activities. Indeed, in a number of recent projects, NGOs were substituted by trained facilitators and animators drawn from self-help groups. Which of the following are the major issues confronting SHGs?
(a) Inadequate number of quality agencies for capacity building
(b) Lack of governance and challenges
(c) High management information
(d) Consistent reporting and supervision
(1) (a) and (d)
(2) (a) and (b)
(3) (c) and (d)
(4) (a) and (c)
(5) (b) and (c)
Q.13. In order to overcome the challenges faced by SHGs, IFAD has contributed to the mainstreaming and to financing programmes for promoting self-help groups in states such as Tamil Nadu and Maharashtra. Which of the following is the main objective of Maharashtra Rural Credit Project ?
(1) To reduce rural poverty and promote rural development
(2) To improve financial services, including savings, among rural poor people.
(3) To improve their status by providing education.
(4) To increase marketing facilities
(5) To open Anganwadis and primary schools in rural areas
Q.14. The AD curve is downward sloping for a small economy in a fixed exchange rate system because (A) ………………… weakens the country’s external competitiveness which (B) ………………… for domestic goods—
(1) (A) positive domestic inflation (B) reduces domestic and foreign demand
(2) (A) positive domestic inflation (B) increases domestic demand
(3) (A) rising domestic inflation (B) reduces domestic and foreign demand
(4) (A) rising domestic inflation (B) increases domestic demand.
(5) (A) rising domestic inflation (B) increases domestic and foreign demand
Paper-III – Finance and Management (There will be questions carrying 2 marks each and questions carrying 1 mark each)
Q.1-3. The Indian financial system has undergone a significant transformation in 1990s. The deregulation of lending rate and free pricing of equity issues etc., have changed the financial market scenario. Investors have shied away from equity market in last few year due to capital market scams and low return. A comparative analysis of all emerging economies confirms that most of the emerging economies have a corporate bond market. However, the Bonds/debts market in India has not yet fully developed and turnover is very low. The most popular Bonds include partly convertible debentures (PCDs), fully convertible debentures (FCDs), deep discount bonds (DDBs), zero coupon bonds (ZCBs), bonds with warrants, floating rate notes (FRNs) / bonds and secured premium notes (SPNs). Of these instruments, fixed rate bonds emerge as the dominant option with maximum volume transacted.
Q.1. Mrs. Laxmi bought 10% p.a. Bonds of ABC Limited for Rs.105/- each, the face value being Rs.100/- each, with maturity date being exactly 3 years after the date of acquisition. Assuming market rate of return being 12% p.a., the per bond present value of the inflow will be:
(1) Rs. 130.00
(2) Rs. 95.30
(3) Rs. 102.70
(4) Rs. 87.90
(5) Rs. 114.40
Q.2. Vatsal Limited is operating at an EBIT of Rs.9 lacs, depreciation already charged being Rs.2.00 lacs and Tax rate being 35%. The present borrowing is Rs.30 lacs by way of Term loan at a cost of 12% p.a. and working capital limit fully utilized being Rs.10 lacs at a cost of 10% p.a. What is the interest Coverage Ratio:
(1) 1.54
(2) 2.50
(3) 1.67
(4) 0.97
(5) 1.36
Q.3. Mr. Mohan bought bonds of the face value of Rs.1000/- each at a discount of 10% on face value, bearing coupon@ 10% p.a., residual tenure for redemption at par being exactly 2 years from the date of acquisition. What is the IRR?
(1) 11.11%
(2) 18.12%
(3) 12.12%
(4) 16.18%
(5) 15.25%
Q.4. Which of the following is not the object of Corporate Governance?
(1) Non-acceptance of Management’s own role as trustees on behalf of the shareholders
(2) Acceptance by management of the inalienable rights of shareholders as the true owners of the corporation
(3) It is about commitment to values
(4) It is about ethical business conduct
(5) It is about making a distinction between personal & corporate funds in the management of a company
Q.5. The halo error that tend to distort appraisals, refers to _____
(1) The tendency to mark high on all factors due to a high impression on some specific factor
(2) The tendency to mark everyone high
(3) The tendency to give excellent ranking to those appraisee who very often wishes halo to the appraiser
(4) The tendency to rate people higher than they deserve in order to see that poor ratings do not harm the individual
(5) The tendency of the evaluator to rate high those employees who exhibit qualities which they themselves possess
Q.6. Which of the following is System 4 participating approach of leadership?
(1) Under this system managers have complete trust in their subordinates and always get ideas from them and use those ideas constructively
(2) Under this system managers have a patronising trust in their subordinates and motivate their people with rewards and some fear and punishment
(3) Under this system, managers concern themselves neither with people nor production
(4) Under this system managers have a substantial but not complete trust in their subordinates, use rewards for motivation and use punishment only occasionally
(5) Under this system managers are highly autocratic and motivate people through fear and punishment
Q.7. Which of the following is/ are functions of financial markets?
(1) Facilitate price discovery
(2) Provide liquidity to financial assets
(3) Reduce search costs
(4) Reduce information costs
(5) All of the above
Q.8. Which one of the following is not a function of the Reserve Bank of India?
(1)It provides currency and operates the clearing system for the banks
(2)It formulates and implements monetary and credit policies
(3) It supervises the operations of Commercial Banks
(4) It regulates foreign exchange transactions
(5) Register and regulate the working of mutual funds
Q.9. The financial development of a country is commonly assessed in terms of all but one of the following ratios
(1) Finance ratio
(2) Cash ratio
(3) Financial interrelations ratio
(4) New issue ratio
(5) Intermediation ratio
Q.10-11. At first, money was thought to be the only incentive and then a little later it was thought that incentives include working conditions, security and perhaps a demographic style of supervision. Subsequently the content of motivation was deemed to be the so-called higher level needs or motives such as esteem and self actualization; responsibility, recognition, achievement and advancement and finally including in its purview growth and personal development.
Q.10. Achievement factor of motivating an individual is the contribution of which theory and what other factor was considered along with it?
(1) Maslow’s theory and supervision factor
(2) Alderfer’s theory and recognition factor
(3) Vroom’s theory and responsibility factor
(4) Herzberg’s theory and advancement factor
(5) Equity theory and salary factor
Q.11. In which of the following models, the relationships are expressed diametrically rather than mathematically, there are more variables and the cognitive process of perception plays a central role and that motivation doesn’t equal satisfaction or performance ?
(1) Vroom’s model
(2) Equity model
(3) Porter Lawler model
(4) Scientific model
(5) ERG model
Q.12. Four major theories on motivation are:
(a) Maslow’s Hierarchy of Needs;
(b) Herzberg’s Motivation/Hygiene (two factor) Theory;
(c) McGregor’s X Y Theories; and
(d) McClelland’s Need for Assessment Theory.
The study of these theories generally validate that –
(1) McGregor’s Theory Y matches much of Maslow’s self-actualization level.
(2) Reward systems must not correspond to intrinsic factors, if employees are to be motivated.
(3) Satisfying extrinsic factors is not commonly attempted method for motivating workers.
(4) Motivation is irrelevant in management (5) There is nothing common in these theories
Q.13. Financial Statements are analyzed and appraised with help of –
(1) Balance Sheet
(2) Profit and loss statements
(3) Ratio analysis of Balance sheet and profit and loss statements
(4) All of the given options
(5) None of the given options
Q.14. DSCR ( Debt Service Coverage Ratio ) and the Debt Equity ratio respectively are based on the logic of having adequate earning to cover debt servicing that shall neither be in excess nor too meager and the leverage is in proportion, are considered to be thumb rule for the financial projection analysis. You are advised to select the optimal ratios norms for the same from the following:
(1) Range of 2 to 3 and 1:2 respectively
(2) 2.5 and 3 respectively
(3) 1.5 to 2 and 2:1 respectively
(4) 1.5 and 1:1.5 respectively
(5) None of the given options
Q.15. The accounts of Government are kept in three parts viz. Consolidated Funds of India, Contingency Funds of India and Public Account. The transactions in the Public Account relate to debt other than those included in the Consolidated Fund of India and the receipts under Public Account do not constitute normal receipts of Government. Hence,
(1) Parliamentary authorisation for payments from the Public Account is, therefore, not required
(2) Parliamentary authorisation for payments from the Public Account is, therefore, required.
(3) Parliamentary authorisation to receipts from the Public Account is, therefore, not required.
(4) Parliamentary authorisation to receipts from the Public Account is, therefore, required.
(5) Parliamentary authorisation for payments and to receipts from the Public Account is, therefore, required.
Q.16. There is enough anxiety over the fast eroding capital of public sector banks in India, especially that of loss-making lenders. As the rising pile of toxic assets eat away their capital, banks are struggling to do business. What could make the mess messier? Banks are mandated to keep 9% of minimum capital adequacy ratio, out of which Basel-III rules mandate a Tier-I capital ratio of 7%. A part of this Tier-I capital of lenders consists of additional Tier-1 bonds. Called AT-1 bonds in market parlance, What may be the biggest risk to the Public Sector Banks with AT-1 bonds:
(1) These are innovative debt instruments that have equity-like perpetuity and may dilute the Government ownership in these banks.
(2) Given the massive losses that public sector lenders have piled up in 2015-16, some banks are fast running out of distributable reserves to service these regular coupon payments on their AT-1 bonds.
(3) May be callable at the initiative of the issuer only after a minimum of five years. To exercise a call option a bank has to receive prior supervisory approval.
(4) Banks may find it difficult to repay these bonds (principal plus interest) at the time of maturity, owing to dearer coupon on these bonds.
(5) Is neither secured nor covered by a guarantee of the issuer or related entity or other arrangement that legally or economically enhances the seniority of the claim vis-à-vis bank creditors.
Q.17. Bond valuations are generally done in terms of valuing the cash flows: (i) coupon payment (interest payment) = (coupon rate * principal) usually paid every 6 months and / or (ii) maturity value = principal or par value = Rs. 1000. The ‘9 7⁄8 % ABC Ltd 2020’ bond pays interest annually. The face value of the bond is Rs. 1,000. ‘ABC Ltd’ bond as of today, if the required rate of return is seven (7) per cent, is –
(1) Rs. 1,950.40
(2) Rs. 1,117.88
(3) Rs. 999.98
(4) Rs. 1,755.44
(5) None among the given options
Q.18. Consider the current government budget where — T is today’s net taxes D is government debt at the start of today G is today’s government spending r is the real interest rate on govenment debt. All variable are positive. The Government is running a deficit today if —
(1) (G – T) > 0
(2) D(1 + r) > (T – G)
(3) r D > (T – G)
(4) ((G + D) r – T) > 0
(5) (T-G-rD) >0
Q.19. The banking sector in India is fully regulated sector. The Reserve Bank of India (RBI), established under the RBI Act, 1934 plays the role as central bank of the country and performs the function of regulating, supervising and controlling banking in India. The RBI is constituted and managed by a central board appointed by Government of India. The Reserve Bank of India derives powers from various acts/laws enacted for regulating banking in India and ensures that the banks function within the permitted frame work of laws, the main being Banking Regulation Act, 1949. Can a commercial bank in India involve itself in a business to acquire, construct and maintain building for indefinite period?
(1) No, it is not permitted as per Section 6(1) or any other section of the B.R. Act.
(2) Yes, it is possible as it is not prohibited u/s 8 of B.R. Act.
(3) Yes, this is permitted u/s 6(1) of B.R. Act
(4) Yes, this is permitted u/s 5 of B.R. Act
(5) Yes, it can be done with the approval of the Board of Directors of the Bank concerned.
THAT’S ALL FOLKS….
IASBakra 