50 MCQ ON TOPIC FIXED INCOME SECURITIES
Question 1:
Which of the following is NOT a feature of a fixed income security?
A) Fixed interest payments
B) Fixed maturity date
C) Variable interest payments
D) Repayment of principal at maturity
Answer: C) Variable interest payments
Question 2:
Which regulatory body oversees the fixed income securities market in India?
A) SEBI
B) RBI
C) IRDAI
D) PFRDA
Answer: A) SEBI
Question 3:
Which of the following is a type of fixed income security commonly issued by the Government of India?
A) Treasury Bills
B) Equity Shares
C) Real Estate Investment Trusts
D) Mutual Funds
Answer: A) Treasury Bills
Question 4:
What is the primary risk associated with investing in fixed income securities?
A) Market Risk
B) Inflation Risk
C) Liquidity Risk
D) Default Risk
Answer: D) Default Risk
Question 5:
Which of the following instruments can be classified as a corporate bond in India?
A) Commercial Paper
B) Certificate of Deposit
C) Debenture
D) Call Money
Answer: C) Debenture
Question 6:
In India, what is the typical maturity period for Treasury Bills?
A) 1 year
B) 5 years
C) 10 years
D) Less than 1 year
Answer: D) Less than 1 year
Question 7:
Which index tracks the performance of government securities in India?
A) NIFTY 50
B) BSE SENSEX
C) NSE G-Sec Index
D) S&P BSE 200
Answer: C) NSE G-Sec Index
Question 8:
What is the main advantage of investing in fixed income securities?
A) High returns
B) Capital appreciation
C) Regular income
D) Tax benefits
Answer: C) Regular income
Question 9:
Which type of bond is issued at a discount and redeemed at face value?
A) Zero-coupon bond
B) Convertible bond
C) Perpetual bond
D) Floating rate bond
Answer: A) Zero-coupon bond
Question 10:
In India, who is the primary issuer of government bonds?
A) Ministry of Finance
B) Reserve Bank of India
C) Securities and Exchange Board of India
D) National Stock Exchange
Answer: B) Reserve Bank of India
Question 11:
What does the term ‘coupon rate’ refer to in fixed income securities?
A) The maturity date
B) The face value of the bond
C) The interest rate paid by the bond
D) The market price of the bond
Answer: C) The interest rate paid by the bond
Question 12:
Which type of fixed income security pays interest that is exempt from taxation in India?
A) Corporate Bonds
B) Tax-free Bonds
C) Commercial Papers
D) Debentures
Answer: B) Tax-free Bonds
Question 13:
Which agency is responsible for credit rating of bonds in India?
A) SEBI
B) RBI
C) CRISIL
D) IRDAI
Answer: C) CRISIL
Question 14:
What is the minimum investment amount for a Government of India Savings Bond?
A) Rs. 1,000
B) Rs. 5,000
C) Rs. 10,000
D) Rs. 50,000
Answer: A) Rs. 1,000
Question 15:
What is the primary function of the Securities and Exchange Board of India (SEBI) in the fixed income market?
A) Issuing government bonds
B) Regulating mutual funds
C) Protecting investor interests
D) Setting interest rates
Answer: C) Protecting investor interests
Question 16:
Which type of fixed income security is typically issued by banks in India?
A) Debentures
B) Bonds
C) Certificates of Deposit
D) Treasury Bills
Answer: C) Certificates of Deposit
Question 17:
What is the usual tenure of Commercial Papers in India?
A) 30 days
B) 90 days
C) 364 days
D) 720 days
Answer: C) 364 days
Question 18:
Which term describes the risk that a bond issuer will fail to make the required payments?
A) Market Risk
B) Interest Rate Risk
C) Liquidity Risk
D) Credit Risk
Answer: D) Credit Risk
Question 19:
What is a key benefit of investing in government bonds?
A) High returns
B) Safety of principal
C) High liquidity
D) Tax exemption
Answer: B) Safety of principal
Question 20:
Which type of bond can be converted into equity shares at the discretion of the holder?
A) Perpetual Bond
B) Convertible Bond
C) Zero-Coupon Bond
D) Floating Rate Bond
Answer: B) Convertible Bond
Question 21:
What is the purpose of a bond indenture?
A) To set the interest rate
B) To outline the terms of the bond
C) To guarantee bond issuance
D) To determine the bond’s market price
Answer: B) To outline the terms of the bond
Question 22:
Which of the following is NOT a type of risk associated with fixed income securities?
A) Inflation Risk
B) Default Risk
C) Liquidity Risk
D) Currency Risk
Answer: D) Currency Risk
Question 23:
What does the term ‘maturity date’ mean?
A) The date when interest payments begin
B) The date when the bond was issued
C) The date when the bond will expire and principal is repaid
D) The date when the bond’s price is recalculated
Answer: C) The date when the bond will expire and principal is repaid
Question 24:
Which of the following instruments is issued at face value and does not bear interest?
A) Debentures
B) Treasury Bills
C) Bonds
D) Fixed Deposits
Answer: B) Treasury Bills
Question 25:
What is the face value of a bond also known as?
A) Coupon rate
B) Market value
C) Principal amount
D) Maturity value
Answer: C) Principal amount
Question 26:
Which fixed income security is commonly used by companies to meet short-term borrowing needs?
A) Corporate Bonds
B) Debentures
C) Commercial Papers
D) Fixed Deposits
Answer: C) Commercial Papers
Question 27:
Who regulates the issuance and trading of government securities in India?
A) IRDAI
B) RBI
C) SEBI
D) Ministry of Finance
Answer: B) RBI
Question 28:
What does ‘YTM’ stand for in bond markets?
A) Year to Maturity
B) Yield to Market
C) Yield to Maturity
D) Yearly Tax Margin
Answer: C) Yield to Maturity
Question 29:
Which of the following is an example of a fixed income mutual fund in India?
A) Equity Linked Savings Scheme
B) Debt Fund
C) Balanced Fund
D) Sector Fund
Answer: B) Debt Fund
Question 30:
What is a ‘callable bond’?
A) A bond that can be converted into shares
B) A bond that can be bought back by the issuer before maturity
C) A bond that pays variable interest
D) A bond that is tax-free
Answer: B) A bond that can be bought back by the issuer before maturity
Question 31:
What is the main objective of investing in fixed income securities?
A) Capital appreciation
B) Speculation
C) Regular income and capital preservation
D) High-risk, high-reward returns
Answer: C) Regular income and capital preservation
Question 32:
Which type of fixed income security has no fixed maturity date?
A) Convertible Bond
B) Perpetual Bond
C) Zero-Coupon Bond
D) Floating Rate Bond
Answer: B) Perpetual Bond
Question 33:
Which of the following is NOT a characteristic of corporate bonds?
A) Higher risk compared to government bonds
B) Potential for higher returns
C) Guaranteed by the government
D) Issued by private and public corporations
Answer: C) Guaranteed by the government
Question 34:
Which term refers to the price at which a bond is traded in the market?
A) Face Value
B) Coupon Rate
C) Market Price
D) Maturity Value
Answer: C) Market Price
Question 35:
What does ‘accrued interest’ refer to in bond markets?
A) The total interest paid over the life of the bond
B) The interest earned but not yet paid since the last payment
C) The interest to be paid at the maturity date
D) The initial interest payment at the time of issuance
Answer: B) The interest earned but not yet paid since the last payment
Question 36:
What is the key difference between bonds and debentures?
A) Bonds are unsecured; debentures are secured
B) Debentures are typically issued by governments; bonds by corporations
C) Bonds are secured; debentures are typically unsecured
D) Bonds have higher interest rates than debentures
Answer: C) Bonds are secured; debentures are typically unsecured
Question 37:
What does the term ‘floating rate bond’ mean?
A) A bond with a fixed interest rate
B) A bond with an interest rate that changes with market conditions
C) A bond with no maturity date
D) A bond that pays interest only at maturity
Answer: B) A bond with an interest rate that changes with market conditions
Question 38:
Which type of bond is typically used for funding large infrastructure projects in India?
A) Corporate Bond
B) Infrastructure Bond
C) Zero-Coupon Bond
D) Convertible Bond
Answer: B) Infrastructure Bond
Question 39:
Which term describes the date on which a bondholder can redeem their bond for cash?
A) Issue Date
B) Coupon Date
C) Call Date
D) Maturity Date
Answer: D) Maturity Date
Question 40:
Which type of bond is backed by the credit of the issuing entity rather than physical assets?
A) Secured Bond
B) Municipal Bond
C) Debenture
D) Treasury Bond
Answer: C) Debenture
Question 41:
What is the primary benefit of investing in fixed deposits (FDs) in India?
A) High liquidity
B) High returns
C) Safety and guaranteed returns
D) Tax-free interest
Answer: C) Safety and guaranteed returns
Question 42:
What does the term ‘duration’ refer to in bond markets?
A) The time left until the bond matures
B) The bond’s interest rate sensitivity to changes
C) The total interest earned over the life of the bond
D) The initial period before interest payments begin
Answer: B) The bond’s interest rate sensitivity to changes
Question 43:
Which of the following is a common issuer of municipal bonds in India?
A) Private corporations
B) State governments
C) The central government
D) Non-profit organizations
Answer: B) State governments
Question 44:
Which term refers to the process of selling a bond before its maturity date?
A) Redemption
B) Call
C) Sale
D) Prepayment
Answer: A) Redemption
Question 45:
Which of the following is true about a zero-coupon bond?
A) It pays interest regularly
B) It is issued at a discount and does not pay periodic interest
C) It has a floating interest rate
D) It is convertible into equity shares
Answer: B) It is issued at a discount and does not pay periodic interest
Question 46:
Which type of bond is linked to the performance of a specific index or commodity?
A) Convertible Bond
B) Perpetual Bond
C) Index-Linked Bond
D) Zero-Coupon Bond
Answer: C) Index-Linked Bond
Question 47:
What is the impact of a rise in interest rates on the price of existing bonds?
A) Prices increase
B) Prices decrease
C) Prices remain the same
D) Prices fluctuate randomly
Answer: B) Prices decrease
Question 48:
Which of the following is a primary market instrument for fixed income securities in India?
A) Treasury Bills
B) Equity Shares
C) Futures
D) Options
Answer: A) Treasury Bills
Question 49:
What does the term ‘spread’ refer to in bond markets?
A) The difference between the purchase price and face value
B) The difference between the bid and ask price
C) The difference between two coupon rates
D) The difference between issue date and maturity date
Answer: B) The difference between the bid and ask price
Question 50:
Which of the following bonds are considered risk-free in India?
A) Corporate Bonds
B) Municipal Bonds
C) Government Bonds
D) Junk Bonds
Answer: C) Government Bonds
