MULTIPLE-CHOICE QUESTIONS WITH ANSWERS RELATED TO CAPITAL AND INTEREST: TYPES OF CAPITAL, GROSS INTEREST, NET INTEREST
Which of the following is NOT a type of capital?
a) Financial capital
b) Social capital
c) Natural capital
d) Ethereal capital
Answer: d) Ethereal capital
Gross interest refers to:
a) Interest earned before deducting taxes
b) Interest earned after deducting taxes
c) Interest earned before deducting expenses
d) Interest earned after deducting expenses
Answer: a) Interest earned before deducting taxes
Net interest is calculated by:
a) Subtracting taxes from gross interest
b) Adding taxes to gross interest
c) Multiplying gross interest by the tax rate
d) Dividing gross interest by the tax rate
Answer: a) Subtracting taxes from gross interest
Which type of capital refers to the skills, knowledge, and experience of individuals?
a) Financial capital
b) Human capital
c) Physical capital
d) Intellectual capital
Answer: b) Human capital
In India, the Reserve Bank of India (RBI) primarily regulates:
a) Social capital
b) Financial capital
c) Natural capital
d) Human capital
Answer: b) Financial capital
Which of the following is considered a form of financial capital in India?
a) Agricultural land
b) Government bonds
c) Industrial machinery
d) Cultural heritage sites
Answer: b) Government bonds
Gross interest earned on a fixed deposit is typically:
a) Fixed
b) Variable
c) Tax-free
d) Indexed
Answer: a) Fixed
Net interest margin (NIM) is a measure used in banking to assess:
a) Profitability from interest-bearing assets
b) Investment in social capital
c) Utilization of natural capital
d) Efficiency of human capital
Answer: a) Profitability from interest-bearing assets
Which of the following factors can influence the level of net interest earned by banks in India?
a) Monetary policy decisions
b) Climatic conditions
c) Cultural practices
d) Technological advancements
Answer: a) Monetary policy decisions
The concept of “time value of money” is fundamental to understanding:
a) Gross interest
b) Net interest
c) Types of capital
d) Capital markets in India
Answer: b) Net interest
In India, the interest rate charged on loans by banks is primarily influenced by:
a) Demand for loans
b) Government regulations
c) Social norms
d) Availability of natural resources
Answer: a) Demand for loans
Which regulatory body in India oversees the functioning of non-banking financial companies (NBFCs)?
a) Securities and Exchange Board of India (SEBI)
b) Reserve Bank of India (RBI)
c) Ministry of Finance
d) National Stock Exchange (NSE)
Answer: b) Reserve Bank of India (RBI)
The term “compound interest” refers to:
a) Interest calculated only on the principal amount
b) Interest calculated on the principal amount and any accumulated interest
c) Interest calculated after deducting taxes
d) Interest calculated annually
Answer: b) Interest calculated on the principal amount and any accumulated interest
Which type of capital is represented by infrastructure projects such as roads, bridges, and power plants?
a) Financial capital
b) Physical capital
c) Intellectual capital
d) Social capital
Answer: b) Physical capital
The concept of “cost of capital” is essential for businesses in India to:
a) Determine the profitability of investments
b) Assess the social impact of projects
c) Evaluate environmental sustainability
d) Measure cultural diversity
Answer: a) Determine the profitability of investments
Which of the following is an example of human capital investment in India?
a) Purchasing stocks in the stock market
b) Building a factory
c) Providing training to employees
d) Acquiring land for agricultural purposes
Answer: c) Providing training to employees
The term “repo rate” in India refers to:
a) The rate at which banks borrow money from the Reserve Bank of India
b) The rate at which individuals borrow money from commercial banks
c) The rate at which companies issue bonds
d) The rate at which the government borrows money from foreign entities
Answer: a) The rate at which banks borrow money from the Reserve Bank of India
Gross interest is often expressed as a percentage of:
a) Principal amount
b) Time period
c) Tax rate
d) Inflation rate
Answer: a) Principal amount
Net interest income of a bank is calculated by subtracting which of the following from the total interest earned?
a) Taxes paid
b) Operating expenses
c) Loan principal
d) Dividends received
Answer: b) Operating expenses
Which type of capital includes the natural resources and ecosystems that support economic activity in India?
a) Financial capital
b) Social capital
c) Natural capital
d) Human capital
Answer: c) Natural capital
The concept of “discount rate” is closely related to:
a) Gross interest
b) Net interest
c) Time value of money
d) Social capital
Answer: c) Time value of money
In India, the Securities and Exchange Board of India (SEBI) regulates:
a) Banking operations
b) Capital markets
c) Taxation policies
d) Industrial production
Answer: b) Capital markets
Which of the following factors does NOT typically influence the level of interest rates in India?
a) Inflation rate
b) Government fiscal policy
c) Exchange rate fluctuations
d) Literacy rate
Answer: d) Literacy rate
The term “usury” refers to:
a) Charging excessive interest rates on loans
b) Offering interest-free loans
c) Investing in socially responsible projects
d) Providing microfinance services
Answer: a) Charging excessive interest rates on loans
Gross domestic product (GDP) growth rate is an important indicator for assessing:
a) Capital mobility
b) Income distribution
c) Economic performance
d) Social cohesion
Answer: c) Economic performance
The term “depreciation” in the context of capital refers to:
a) Increase in the value of assets over time
b) Wear and tear of physical assets over time
c) Fluctuations in stock market prices
d) Growth of human capital through education
Answer: b) Wear and tear of physical assets over time
Which of the following is considered a source of financial capital for businesses in India?
a) Labor unions
b) Angel investors
c) Environmental regulations
d) Historical landmarks
Answer: b) Angel investors
The concept of “interest rate risk” is associated with:
a) Changes in the rate of inflation
b) Changes in the rate of unemployment
c) Changes in the level of interest rates
d) Changes in exchange rates
Answer: c) Changes in the level of interest rates
Net present value (NPV) is a method used to evaluate:
a) Gross interest earned
b) Capital gains tax
c) Investment projects
d) Social welfare programs
Answer: c) Investment projects
Which type of interest rate is set by the Reserve Bank of India to influence the money supply and inflation?
a) Prime rate
b) Repo rate
c) LIBOR
d) Treasury bill rate
Answer: b) Repo rate
In India, the term “fiscal deficit” refers to the difference between:
a) Government expenditure and revenue
b) Imports and exports
c) Public and private investment
d) Gross domestic product (GDP) and gross national product (GNP)
Answer: a) Government expenditure and revenue
The interest earned on savings accounts in India is typically:
a) Compound interest
b) Simple interest
c) Tax-exempt
d) Indexed
Answer: a) Compound interest
Which of the following is NOT a characteristic of financial capital?
a) Tangibility
b) Transferability
c) Durability
d) Divisibility
Answer: a) Tangibility
The term “leverage” in finance refers to:
a) Increasing the proportion of debt in a company’s capital structure
b) Decreasing the proportion of debt in a company’s capital structure
c) Investing in low-risk assets
d) Paying off existing debts
Answer: a) Increasing the proportion of debt in a company’s capital structure
The term “risk premium” refers to the additional return required by investors for:
a) Low-risk investments
b) High-risk investments
c) Government bonds
d) Fixed deposits
Answer: b) High-risk investments
In India, the term “venture capital” typically refers to investment in:
a) Established companies with stable cash flows
b) Start-up or early-stage companies with high growth potential
c) Government securities
d) Real estate projects
Answer: b) Start-up or early-stage companies with high growth potential
The term “liquidity risk” refers to the risk associated with:
a) Changes in interest rates
b) Inability to convert assets into cash quickly without significant loss
c) Political instability
d) Currency fluctuations
Answer: b) Inability to convert assets into cash quickly without significant loss
Which of the following is NOT a type of interest rate commonly used in financial transactions?
a) Nominal rate
b) Real rate
c) Inflation rate
d) Market rate
Answer: c) Inflation rate
The term “working capital” refers to:
a) Long-term investments in infrastructure
b) Short-term assets and liabilities necessary for day-to-day operations
c) Capital invested in research and development
d) Equity capital raised through IPOs
Answer: b) Short-term assets and liabilities necessary for day-to-day operations
Which regulatory body in India oversees the functioning of insurance companies?
a) Reserve Bank of India (RBI)
b) Insurance Regulatory and Development Authority of India (IRDAI)
c) Securities and Exchange Board of India (SEBI)
d) Ministry of Finance
Answer: b) Insurance Regulatory and Development Authority of India (IRDAI)
Which of the following factors can affect the demand for capital in India?
a) Changes in consumer preferences
b) Technological advancements
c) Government regulations
d) All of the above
Answer: d) All of the above
The term “maturity” in finance refers to:
a) The date on which a loan is issued
b) The date on which a loan is repaid
c) The length of time until a financial instrument expires
d) The date on which interest payments are made
Answer: c) The length of time until a financial instrument expires
Which of the following is an example of physical capital in India?
a) Educational institutions
b) Software development companies
c) Manufacturing plants
d) Intellectual property
Answer: c) Manufacturing plants
The concept of “time preference” in economics refers to:
a) The tendency of individuals to prefer present consumption over future consumption
b) The preference for long-term investments over short-term investments
c) The preference for low-risk assets over high-risk assets
d) The tendency of individuals to save rather than spend
Answer: a) The tendency of individuals to prefer present consumption over future consumption
Which of the following is a characteristic of venture capital investment in India?
a) Low risk
b) High liquidity
c) Long-term horizon
d) Guaranteed returns
Answer: c) Long-term horizon
The term “liquidity premium” refers to the additional return required by investors for:
a) Investing in illiquid assets
b) Investing in liquid assets
c) Investing in government securities
d) Investing in foreign currencies
Answer: a) Investing in illiquid assets
The term “crowdfunding” refers to the practice of:
a) Investing in government bonds
b) Investing in large-scale infrastructure projects
c) Raising funds from a large number of individuals via online platforms
d) Investing in real estate properties
Answer: c) Raising funds from a large number of individuals via online platforms
The term “credit rating” is used to assess:
a) The creditworthiness of individuals and businesses
b) The performance of stock markets
c) The effectiveness of monetary policy
d) The stability of exchange rates
Answer: a) The creditworthiness of individuals and businesses
The term “opportunity cost” refers to:
a) The cost of borrowing money
b) The cost of investing in risk-free assets
c) The cost of forgoing the next best alternative when making a decision
d) The cost of inflation on savings
Answer: c) The cost of forgoing the next best alternative when making a decision
Which of the following is NOT a component of interest expense for businesses in India?
a) Payment to shareholders
b) Payment to bondholders
c) Payment to suppliers
d) Payment to lenders
Answer: c) Payment to suppliers
