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1. Why Assets and Liabilities are grouped into different buckets as per their remaining
maturity period ?
A. To analyse the net liquidity(cumulative) position for B. To analyse the liquidity position of the Bank
each maturity bucket C. To analyse the solvency position of the Bank
D. To analyse both liquidity and solvency position of the
Bank.
Your answer is: D. To analyse both liquidity and solvency position of the Bank.

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2. ALM process became effective from which date?
A. 1st January,1999 B. 1st April,1999
C. 1st Spt, 1999 D. 1st Dec,1999
Your answer is: D. 1st Dec,1999

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3. The parameters that are selected for the purpose of stabilising ALM of Banks are:---
A. Net Interest Margin(NIM) B. Net Profit of the Bank
C. Operating Profit Of the Bank D. Yield on Advances
Your answer is: C. Operating Profit Of the Bank

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4. Net Interest Margin (NIM) is calculated as-
A. Interest on Loan & Advances / Total Deposit B. Interest On Loans & Adv./ Total Advance
C. Net Interest Income (NII) / Average Interest Earning D. Interest Income+ H.O.interest / Interest Paid On Deposit
Assets
Your answer is: B. Interest On Loans & Adv./ Total Advance

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5. Through ALM a Bank manages----
A. Maturity Profiles of both Assets and Liabilities B. Rate of Interest of both Assets and Liabilities
C. Risk Exposure of the Bank D. 1 to 3, all
Your answer is: C. Risk Exposure of the Bank

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6. A -- ----option gives the right to buy and a -----option gives the right to sell a specified
amount of underlying asset at a -----price
A. Put, Call, Strike B. Call, Put, Strike
C. Call, Put, Low D. Put, Call, high
Your answer is: C. Call, Put, Low

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7. High volatility in interest rate can pause what kind of risk to a Bank?
A. Embedded Option Risk B. Yield Curve Risk
C. Price Risk D. Basis Risk
Your answer is: C. Price Risk

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8. Traditional Method of IRRM is not always possible because it involves-------
A. Changing of interest rates on Assets B. Changing interest rate on Liabilities
C. Restructuring of Balance Sheet D. Restructuring of Profit and Loss A/c
Your answer is: B. Changing interest rate on Liabilities

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9. Process of ALM consists of---
A. Reviewing the interest rate structure and comparing the B. Examining the credit risk and contingency risk that may
same to the interest/ product pricing of both assets and originate either due to rate fluctuations or otherwise and
liabilities assess the quality of assets
C. Reviewing the actual performance against the D. 1 to 3, all
projections made and analysing the reasons for any effect
on the spreads
Your answer is: D. 1 to 3, all
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10. Which committee/Deptt. monitors ALM activity in a bank?
A. Risk Management Committee B. Asset Liability Management Committee(ALCO)
C. Fund Management Deptt. D. Treasury Deptt.
Your answer is: C. Fund Management Deptt.

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11. In GAP analysis all the rate sensitive Assets and Liabilities are clubbed into different groups
according to------
A. Rate of interest B. Size of Deposit/ Advance
C. Residual Tenure D. Initial (original)Tenure
Your answer is: B. Size of Deposit/ Advance

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12. When a Bank has more interest earning assets than its liabilities on which it pays
interest,NII will ------- when rate of interest ----------
A. Decline,Declines B. Increase,Declines
C. Decline, Increase D. Insufficient information for reaching a conclusion.
Your answer is: C. Decline, Increase

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13. ALM involves---------
A. Managing all the Assets of a Bank B. Managing all the Liabilities of a Bank
C. Managing both Assets and Liabilities of a Bank on a D. Managing both Assets and Liabilities of a Bank during
continuous basis. annual closing, every year
Your answer is: C. Managing both Assets and Liabilities of a Bank on a continuous basis.

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14. Why depositors keep their money with a Bank?
A. To save for future B. To earn interest
C. To keep their money safe from any loss D. 1 to 3, all
Your answer is: D. 1 to 3, all

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15. Under Interest Rate Future the asset that can be bought or sold is known as -------while
the price at which parties agree to transact in the future is called -------------
A. Future Asset, Future Price B. Derivative, Future Price
C. Underlying,Future Price D. Derivative,Strike Price
Your answer is: C. Underlying,Future Price

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16. Bucket Gap-Positive, Change In Intt Rate-Increase, Change in Intt. Paid will?
A. Increase B. Decrease
C. Remain same D. Insufficient information for reaching a conclusion.
Your answer is: C. Remain same

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17. In GAP analysis when the bank has negative gap(RSL>RSA) and the interest rate rises the
NII will----------
A. Increase B. Decrease
C. Remain same D. Insufficient information for reaching a conclusion.
Your answer is: C. Remain same

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18. When Banks hold short- term assets, relative to liabilities, it potentially exposes itself to --
---------
A. Reinvestment Risk B. Refinancing Risk
C. GAP Risk D. Basis Risk
Your answer is: C. GAP Risk
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19. At any point of time a Bank s state can be---
A. Solvent and Liquid, B. Solvent but not Liquid
C. Liquid but not Solvent D. 1 to 3, all
Your answer is: D. 1 to 3, all

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20. Under Interest Rate Swap, swap (exchange) can be done between-----------
A. Fixed Rate with Floating Rate B. Floating Rate with Fixed Rate
C. Floating Rate with another Floating Rate having different D. 1 to 3, all
benchmark
Your answer is: D. 1 to 3, all

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21. Why Asset and Liability Management necessary for a Bank ?
A. To avoid imbalance in availability of fund B. To avoid imbalance in earnings of the Bank
C. It helps in proper planning for fund deployment D. 1 to 3, all
Your answer is: D. 1 to 3, all

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22. The liquidity risk generated due to crystallisation of contingent liabilities is known as--
A. Funding Risk B. Time Risk
C. Call Risk D. Mismatch Risk
Your answer is: C. Call Risk

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23. ALM helps in---------
A. Formulation of critical business policies B. Efficient allocation of fund to different business
segments
C. Designing of products with appropriate pricing D. 1 to 3, all
strategies
Your answer is: D. 1 to 3, all

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24. ALM is aimed at limiting the mismatches rather than eliminating the mismatches
because-
A. Reserve Bank of India does not allow it. B. Banks earn profits out of mismatches and the idea is to
limit the mismatches through ALM rather than eliminate
the mismatches.
C. Economy progresses by mismatches only D. Government Policy is against complete elimination of
mismatches.
Your answer is: C. Economy progresses by mismatches only

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25. Synthetic methods use market Derivatives for Interest Rate Management.These
derivatives are-------
A. Futures B. Options
C. Swaps D. 1 to 3, all
Your answer is: D. 1 to 3, all