SECTION “A” (MULTIPLE CHOICE QUESTIONS)
1. Choose the correct answer for each from the given options:
(i) For deferred payments it Is used:
* simple agreement
* credit instrument
* none of these
(ii) The reputation of a bank depends on:
(iii) Scheduled bank is enlisted with the:
* Commercial bank
* Central bank
* National bank
* nope of these
(iv) The monopoly of the issuance of currency notes is a characteristic of:
* Foreign Bank
* Central Bank
* Exchange Bank
(v) Bank facilitates on line transfer of funds from:
* One place to another place
* One bank to another bank
* one branch to another branch
* one business to another business
(vi) Clearing House reduces the movement of:
* Credit Instruments
* Plastic Money
* Gold and Silver
(vii) Specimen signature card is signed by the:
* account holder
(viii) Bank purchases and sells:
* Stocks and bonds
* Immovable property
* Industrial goods
(ix) The Central bank of Pakistan is:
* National Bank
* Habib Bank
* State Bank
(x) A rise in bank rate discourages:
* fixed account holders
* saving account holders.
* current account holders
(xi) Bank must keep sufficient funds available to fulfill the demand of:
(xii) This instrument is payable on demand drawn by the bank upon itself:
* Pay order
* promissory note
* Bill of exchange
* none of these
(xiii) Any alteration in cheque must be signed by the:
* account holder
* holder of cheque
(xiv) Bank finance for the purchase of a car is called:
* unsecured loan
* short term finance
* secured loan
* customer finance
(xv) Bank does not pay interest on:
* current account
* saving account
* profit & loss account
* fixed account
(xvi) Credit control is the function of:
* Commercial bank
* Central bank
* Industrial bank
* Agricultural bank
SECTION ‘B’ (SHORT-ANSWER QUESTIONS)
Note: Attempt 7 questions from this section.
2.(i) Define bank. Write the different types of bank accounts.
ANSWER: Please see Q. 2(i) of 2013 Regular
(ii) Describe the procedure of opening a Bank account.
ANSWER: Please see Q.2 (iii) of 2014 Private
(iii) Define Cheque and explain its parties.
“Cheque is an instrument in writing containing an unconditional order, addressed to a banker, sign by the person who has deposited money with the banker, requiring him to pay on demand a certain sum of money only to or to the order of certain person or to the bearer of instrument.”
Drawer is the party who draws the cheque upon a specified banker. He is the maker of the cheque. He is the account holder who draws the cheque for drawing money from his bank account. He is the person’ who issues cheque directing the bank to pay a certain sum of money to a certain person or to the bearer. Thus, the person who signs the cheque is known as drawer.
Drawee is the party upon whom the cheque is drawn. Drawee is the bank. It is the party to whom the drawer gives order to pay the amount to the person named on the cheque or his order to the bearer. When the bank follows the order and pays the amount of the cheque then the cheque is said to be honored. In case of refusal of the order, the cheque is said to be dishonored.
Payee is the party who presents the cheque for payment. He is the person who receives money from bank. He is the party in favor of whom cheque is issued, The payee is the person whose name is mentioned on the cheque, If the cheque is made payable to self, the drawer himself becomes the payee.
(iv) Describe the function of the Central bank as a Clearing house.
As the custodian of the cash reserves of the commercial banks, the central bank acts as the clearing house for these banks. Since all banks have their accounts with the central bank, the central bank can easily settle the claims of various banks against each other with least use of cash. The clearing house function of the central bank has the following advantages:
(i) It economies the use of cash by banks while settling their claims and counter-claims.
(ii) It reduces the withdrawals of cash and these enable the commercial banks to create credit on a large scale.
(iii) It keeps the central bank fully informed about the liquidity position of the commercial banks.
(v) What are secured loans and unsecured loans?
ANSWER: Please see Q.2 (iv) of 2014 Private
(vi) State the common Utility services of a Commercial bank.
General Utility Services:
The General utility services include the following:
(i) Safety Locker facility:
(ii) Payment Mechanism or Money Transfer:
(iii) Travelers’ cheques:
(iv]: Circular Notes or Circular Letters of Credit:
(v) Issue “Travellers Cheques”:
(vi) Letters of Credit:
(vii) Acting as Referees:
(viii) Provides Trade Information:
(ix) ATM facilities:
(x) Credit cards:
(xiv) Advice on Financial Matters:
(xv) Factoring Service:
(vii) Define Bill of exchange and also draw its specimen.
Definition of ‘Bill Of Exchange’:
A non-interest-bearing written order used primarily in international trade that binds one party to pay a fixed sum of money to another party at a predetermined future date.
SPECIMEN OF BILL OF EXCHANGE
(viii) Define Balance of trade and Balance of payments.
BALANCE OF TRADE:
The balance of trade is known as the visible balance. It is the relationship between a country’s payments for imports or goods and its receipts from the export of goods. In other· words balance of trade means only the balance between merchandise trade and visible trade i.e. imports and exports of goods. If the value of imports exceeds the value of exports, we say that the balance of trade is “unfavorable” or “deficit”. If the value of exports exceeds the value of import, we say the balance of trade is “favorable” or “Surplus”. In balance of trade invisible items are not counted.
BALANCE OF PAYMENTS:
Balance of payments (BoP) accounts are an accounting record of all monetary transactions between a country and the rest of the world. These transactions include payments for the country’s exports and imports of goods, services,· financial capital, and financial transfers For example, if a country is importing more than it exports, its trade balance will be in deficit, but the shortfall will have to be counterbalanced in other ways – such as by funds earned from its foreign investments, by running down central bank reserves or by receiving loans from other countries.
(ix) Write sources of Short term finance.
Short term finance: This type of finance is required
for a period of less than a year.
Sources of short term finance:
1. Trade credit: Trade credit is a loan in the form of goods. Trade credit is given by one firm to another firm which buys goods. This credit range from 15 days to 3 months is granted on the basis of good will of the purchaser. Trade credit is given by the seller to the buyer of goods. It is extended by the whole seller to the retailer. Such credit facility may be called a trade credit.
2. Advances from customers: Sometimes the reputed business houses receive a part of the price or payment from the buyers before the supply of goods. The remaining amount is received on the supply of the commodity. Advances are received for the confirmation of orders.
3. Commercial banks: The major portion of short term loans and advances are provided by the commercial banks.
4. Financial institutions: Financial institutions also advance short term finance to the business. The finance corporations help the business by providing short term funds. Some financial institutions are working at provincial level under the cooperative societies act.
(x) Define Endorsement and describe Conditional endorsement.
ANSWER: Please see Q. 2(viii) of 2013 Regular
SECTION C (DETAILED-ANSWER QUESTION)
Note: Attempt Two questions from this section
3. What is meant by Rate of exchange? Describe the factors which affect the rate of exchange.
ANSWER: Please see Q. 3(or) of 2013 Regular
4. Define Commercial Bank. Describe its primary and secondary functions.
ANSWER: Please see Q.4 of..2014 Private
5. Define Bank funds, Describe profitable and non-profitable uses of Bank funds.
ANSWER: Please see Q. 4 of 2013 Regular