UPSC Essentials | Daily subject-wise quiz | Economy MCQs on RBI, Bond Yield, Landlord Port and more (Week 51)

1. A bond is a tradeable instrument issued by the Central Government or the State Government.

2. Government securities are debt instruments in which an investor loans money to an entity which borrows the funds for a defined period of time at a variable or fixed interest rate.

Which of the statement(s) given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

QUESTION 2

Consider the following statements about Landlord Port:

1. The port authority acts as a regulatory body while the operations on the port are carried out by private companies.

2. Kandla Port is the first 100 per cent landlord major port.

3. Land Port Bhithamore is located in Gujarat.

How many of the statements given above are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

QUESTION 3

With reference to the sugar sector in India, consider the following statements:

1. The export of sugar is carried out through the Ministry of Agriculture & Farmers’ Welfare

2. The sugar marketing year runs from April to March.

Which of the statement(s) given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

QUESTION 4

Which of the following is not a function of the Reserve Bank of India (RBI)?

(a) It provides a loan facility to the business and ensures economic growth.

(b) It issues, exchanges, and destroys the currency notes.

(c) It acts as regulator and supervisor of the financial system.

(d) It manages foreign exchange.

QUESTION 5

With reference to the relationship between yield and price of a bond, consider the following statements:

1. If market interest rate levels rise, the price of a bond increases.

2. If market yields decline, the price of the bond rises.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

ANSWERS TO THE MCQs

1. (d)

FYI:

— A bond is a financial instrument in which an investor lends money to an entity (usually a corporation or government) that borrows the cash for a certain period of time at a variable or fixed interest rate. Bonds are issued by corporations, municipalities, states, and sovereign governments to raise funds for a variety of projects and activities. Bond owners are the issuer’s debt holders, or creditors. Hence, statement 1 is not correct.

— A Government Security (G-Sec) is a tradeable instrument issued by the central or state governments. It acknowledges the government’s debt obligations. Such securities are classified as either short-term (treasury bills with original maturities of less than one year) or long-term (government bonds or dated securities with original maturities of one year or more). Hence, statement 2 is not correct.

— In India, the central government issues both treasury bills and bonds or dated securities, whereas state governments exclusively issue bonds or dated securities known as State Development Loans (SDLs). G-Secs have almost no default risk and are hence referred to as risk-free gilt-edged securities.

Therefore, option (d) is the correct answer.

(Other Source: http://www.rbi.org.in)

2. (a)

FYI:

— The landlord port is characterised by its mixed public-private orientation. Under this model, the port authority acts as regulatory body and as landlord, while port operations (especially cargo handling) are carried out by private companies. Hence, statement 1 is correct.

— Jawaharlal Nehru Port becomes the first 100% Landlord Major Port of India. The Jawaharlal Nehru port is one of the major ports owned by the Shipping Ministry. Hence, statement 2 is not correct.

— The central government-run Jawaharlal Nehru Port Authority (JNPA) signed a concession agreement with J M Baxi Ports and Logistics Ltd to upgrade, equip and operate and manage its Shallow Water Berth (SWB) and Coastal Berth (CB) terminals through public-private partnership (PPP).

— The SWB and CB terminals will be upgraded and managed by a special protection vehicle (SPV) named ‘Nhava Sheva Distribution Terminal Private Limited’ formed by J M Baxi group.

— Land Port Bhithamore is located in the Sitamarhi district of Bihar along the international border between India and Nepal. Hence, statement 3 is not correct.

Therefore, option (a) is the correct answer.

(Other Source: pib.gov.in)

3. (d)

FYI:

— India’s sugar production fell 6 per cent to 311 lakh tonnes till April 15 of the 2022-23 marketing year ending September, mainly due to lower output in Maharashtra.

— The export of sugar is carried out through the Agricultural and Processed Food Products Export Development Authority (APEDA), under the Ministry of Commerce. Hence, statement 1 is not correct.

— The sugar marketing year runs from October to September. Hence, statement 2 is not correct.

— The sugar production in Uttar Pradesh rose to 96.6 lakh tonnes from October 1, 2022-April 15, 2023, against 94.4 lakh tonnes in the year-ago period.

— Maharashtra’s sugar production fell to 105 lakh tonnes from 126.5 lakh tonnes, while output in Karnataka declined to 55.3 lakh tonnes from 58 lakh tonnes.

— The Central Government has withdrawn customs duty on the export of sugar to encourage the sugar industry.

Therefore, option (d) is the correct answer.

4. (a)

FYI:

— The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934.

Main Functions

— It formulates, implements and monitors the monetary policy for maintaining price stability while keeping in mind the objective of growth.

— It acts as regulator and supervisor of the financial system. It prescribes broad parameters of banking operations within which the country’s banking and financial system functions for maintaining public confidence in the system, protecting depositors’ interest and providing cost-effective banking services to the public.

— It manages the Foreign Exchange Management Act, 1999 to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.

— It issues, exchanges and destroys currency notes as well as puts into circulation coins minted by the Government of India to give the public adequate quantity of supplies of currency notes and coins and in good quality.

— It introduces and upgrades safe and efficient modes of payment systems in the country to meet the requirements of the public at large for maintaining public confidence in the payment and settlement system.

— It acts as Banker to the Government and performs merchant banking functions for the central and the state governments.

— It maintains the banking accounts of all scheduled banks.

Therefore, option (a) is the correct answer.

(Source: http://www.rbi.org.in)

5. (b)

FYI:

— If market interest rate levels rise, the price of a bond falls. Conversely, if interest rates or market yields fall, the bond price rises. Hence, statement 1 is not correct and statement 2 is correct.

— In other words, the yield on a bond is inversely proportional to the price.

— The relationship between yield to maturity and coupon rate of bond may be stated as follows:

— When the market price of the bond is less than the face value, i.e., the bond sells at a discount, YTM > > coupon yield.

— When the market price of the bond is more than its face value, i.e., the bond sells at a premium, coupon yield > > YTM.

— When the market price of the bond is equal to its face value, i.e., the bond sells at par, YTM = coupon yield.

Therefore, option (b) is the correct answer.

(Source: http://www.rbi.org.in)

Previous Daily Subject-Wise-Quiz

Daily subject-wise quiz — Polity and Governance (Week 51)

Daily Subject-wise quiz — History, Culture, and Social Issues (Week 51)

Daily subject-wise quiz — Environment, Geography, Science and Technology (Week 51)

Daily subject-wise quiz — Economy (Week 49)

Daily subject-wise quiz – International Relations (Week 50)

Subscribe to our UPSC newsletter and stay updated with the news cues from the past week.