SIKKIM MANIPAL UNIVERSITY DDE

Master of Business Administration MBA Semester IV

MF0017 Merchant Banking & Financial Services 4 Credits
Book ID B1815

Model Question Paper

Time:
Max.Marks:140

3 hours

Section A
ESSAY TYPE QUESTIONS (10 Marks each)
[Please answer Any Four essay type questions in a separate page answer sheet
especially provided for the purpose]

1. Explain the concept of merchant banking. Give a small introduction on book

building
and write about the methods and guidelines for book
building.(Refer unit 1)
2. Explain the whole concept of issue management which includes pre-issue and
post issue management. (Refer unit 2)
3. Give the difference between Bank Vs Depository. Explain the functions
performed by depository.(Refer unit 6)
4. Write about the concept of securitization and its features. Explain the process
of securitization of debts and its advantages.(Refer unit 13)
Case Study
Investors Investing in Long-Term Funds With the decline in interest rates, investors
are likely to enjoy the benefits of investing in longer period funds yielding returns of
9.5-10 per cent. Sometime back, investors were investing in low-risk funds such as
liquid and FMPs (fixed maturity plans), but money is now being invested in long
duration funds. Hence, short-term income funds, dynamic bond funds and long-term
bond funds are the viable options of investment. Moreover, it is to be noted that it is
not the risk factor as much as the fact that investors are willing to invest money in
longer duration funds. Funds such as FMPs which were considered to be safe and
protected till June 2012 are now closing down. In 2011, investors were wary with the
declining interest rates. This seems to have played a pivotal role in the investment
factor. In 2011, UTI fund was able to yield 11 per cent return and short-term funds
delivered 10.5 per cent return. However, moving forward double digit returns might
be reduced to single digit for instance, 9.5-10.5 per cent. Looking from the
perspective of

risk returns, investors most likely will invest in bond funds, provisional dynamic
bond funds and short-term income funds. The regulatory bodies i.e. RBI and Central
Banks are going to closely monitor the investment trends and the changes taking
place in the stock market. Accordingly, they will cut down the rates. To be more
specific, the January-March 2013 quarter could witness some decline in rates due to
the slow growth of the economy. UTI has repositioned its portfolio. The company
has increased the time period of all its funds. For instance, the duration of bond funds
has been increased to seven years. Shorter income funds are now available for three
or three and half years. About nine months ago, the above mentioned funds were
available for half the time period than they are available now. Therefore, keeping
pace with the dynamic stock markets and anticipating the investment trends, UTI has
increased the time period of the funds offered in its portfolio.
Questions
5. Do you think that the risk factor is instigating investors to move towards longterms funds?
6. Do most of the non-banking financial institutions need to reposition their portfolio
as per the current Indian scenario?
Source: Adapted from http://www.business-standard.com/india/news/ money-ismoving-into-longer-term-funds-amandeep-chopra/493257/ (Retrieved on 23
November 2012) (refer unit 11)
Section B
Multiple Choice Questions (MCQ)
[Please answer all the following questions]

1. Who is responsible for monitoring of trade and setting of policies and

procedures to prevent insider trading?
a) Portfolio manager
b) Compliance officer
c) Underwriter
d) Auditor
2. Which of the following is a process by which capital is mobilised from a
large number of investors and is made available to all those who need
them, mainly to corporate customers?
a) Working capital
b) Project finance
c) Financial intermediation
d) Loan syndication

3. Which among the following is the function of

registrar to an issue?
Maintaining records of applications.
Executing a trust deed
Undertakes the management of portfolio of
securities
d. Coordinating the prelimnary distribution of
securities and acquire direct subscription form
investors.
4. As per the _______________, IDR is an instrument in the form of a
depository receipt created by the Indian depository in India against the
underlying equity shares of the issuing company.
a. Companies (issue of IDRs) Rules, 2004
b. Companies Act, 1956( the Act)
c. SEBI(Custodian of Securities) Regulations, 1996
d. SEBI ( Depositories and Participants), Regulations,1996
5. ___________ is a type of transferable financial
security which is traded in a local stock exchange .
a. Debt instruments
b. Depository Receipts( DRs)
c. Offer documents
d. Initial Public offerings
6. A company offering convertible or non-convertible debt instruments
through an offer document should comply with which of the following?
a. 75 % book building
b. Requirement of credit rating
c. Agreement with stock exchange
d. Appointment of registrar to issue
7. Which of the following comes under the pricing norms of the
OTCEI? a. A company must have a minimum paid up capital of
Rs. 30 lakhs
b. The minimum offer to the public should be 25% of the issued capital
c. The promoter retains at least 20 percent of the total issued capital for
three years from the date of the assignment of securities in the
proposed issue.
d. The sponsor of the issue must provide the market makers to give buy
and sell quotes in the securities
8. ____________ relates to the action initiated by the issuing company through
its merchant banker prior to the issue of the shares.
a. Post issue management
b. Memorandum of understanding
c. Pre issue management
d. Due diligence
a.
b.
c.

9. __________ must submit a certificate within two weeks from the

date of allotment to the board.
a. The pre-issue lead merchant banker
b. The post-issue lead merchant banker
c. A lead merchant banker
d. The registrars to an issue

10. Which is the contract that has an agreement to buy/sell an asset at a

predetermined future date on an agreed price?
a. Futures
b. Options
c. Forward
d. Short selling
11. The securities traded in ___________________ segment are eligible for
short selling.
a. Primary market
b. Futures and options
c. Forwards
d. Secondary market
12. Which of the following is the function of a custodian?
Maintains the securities of a shareholder in an
electronic form
a.

Deals in securities on behalf of clients for a

commission
b.
c.

Administrates and protects the assets of the clients

Deals with the depository directly or on behalf of

their clients
d.

13. Which of the following is a condition that a subbroker should satisfy to get the certificate from
SEBI?
A sub-broker should be a member of a stock
exchange.
a.

Authorised, in writing, by a broker for affiliation in

buying, selling or dealing in securities
b.

Maintains a database of their clients according to

any format
c.

Takes adequate steps for redressal of investor

grievances within three month of the receipt of the
complaint.
d.

14. The post-issue lead merchant banker maintains close

coordination with the __________________. a.
Investor
b. Registrars to an issue
c. Individual shareholders
d. Investment banker

15. A _____________ is a member of a recognised stock exchange who

buys, sells, and deals in securities on behalf of the clients for a
commission. a. Depository
b. Sub broker
c. Stock broker
d. Custodian

16. Financial services enable mobility and allocation of savings

through the transformation of savings into _____________.
a. investments
b. loans
c. debentures
d. fixed deposits

17. In which of the following the transfer of risks takes place?

a. Finance lease
b. Direct lease
c. Tripartite lease
d. Operating lease
18. On what subject was the draft introduced by the
International Accounting Standard Committee
Accountants of India (ICAI) in 1987?
a. AS-19
b. IAS-17
c. IAS-4

d.

IAS-16

19. Which one of the following term best describes "The

value of a leased asset is the estimated fair value of
the asset at the end of the lease term".
a. Residual value
b. Lease
c. Inception of lease
d. Economic life
20. The asset must be depreciated over its expected
useful life under __________, using rates for similar
assets.
a. IAS 16
b. IAS 38
c. IAS 17
d. IAS 4
21. Which lease does not give rise to manufacturers or
dealer's profit to the lessor but meets the criteria, of
the property to the lessee by the end of the lease term?
a. Operating lease
b. Direct financing lease
c. Sales type lease
d. Finance lease

22. Which of the following is a short-term contract in which the only the rights
to use the property is transferred by the lessor to the lessee? a. Financial
lease
b. Leveraged lease
c. Operating lease
d. Direct lease
23. From the viewpoint of the lessor, the cash outflows contains ________.
a.
b.
c.
d.

Income-tax on lease payments

Security deposit
Tax shield on depreciation
Residual value

24. ___________ involves three parties, the lessor, lessee and the financier.
Operating lease
Financial lease
Direct leasing
Leveraged lease
25. The ___________ are financial institutes which provide financial assistance
in leasing.
a. Credit union
b. Leasing intermediaries
c. Stock brokerage firms
d. Asset management firms
a.
b.
c.
d.

26. From the point of view of lessor, the ___________ aims at determining
whether to accept a lease proposal or to choose from the alternative
proposals. a. Appraisal method
b. Lease evaluation
c. Break-even lease rental
d. Discount rate

27. Each instalment in the hire-purchase finance consists of ____________.

a. Ownership of goods and payment
b. Capital payment and the interest
c. Interest and agreement
d. Depreciation and finance charge

28. A ________ is a contract where the seller transfers the ownership of goods
to the buyer for a price.
a.

Sales of goods

b.
c.
d.

Hire Purchase
Agreement
Lease

29. In operating lease, who bears the maintenance cost of the

assets? a. Hirer
b. Seller
c. Lessee
d. Lessor

30. In ____________ factoring, the factor provides all types of facilities except
debt protection.
a. Non-recourse
b. Advance
c. Recourse
d. Full
31. The factoring contract is similar to any other __________agreement
which is regulated under the law of contract. a. Factoring
b. Sale purchase
c. Forfaiting
d. Bank guarantee
32. __________________ are bills of exchange that are supplemented by
documents confirming the authenticity of a trade transaction between the
buyer and the seller of goods.
a. Usance bills
b. Supply bills
c. Documentary bills
d. Accommodation bills
33. What kind of document is accepted by Reserve Bank of India (RBI) as
security to grant demand loans to the scheduled banks?
a. Promissory notes
b. Supply bills
c. Accommodation bills
d. Usance bills

34. What is the margin between the advance granted by the bank and the face
value of the bill ?
a. Discount
b. Tenure
c. Maturity date
d. Tax benefits

35. As the financial institutions offer refinancing facility to banks for bills

discounted and purchased by them, the discounted bills are a good

_______.
a.
b.
c.
d.

Liability
Net worth
Asset
Debenture

36. Which of the following has an advantage of obtaining a profit that is higher

than other types of loan and advances ?

a.
b.
c.
d.

Facility of refinancing
Bill discounting
Credit rating
Discount charge

37. Which of the following insurance provides life insurance protection for a
specific period only?
a.
b.
c.
d.

Whole life insurance

Endowment insurance
Term insurance
Annuities

38. Which of the following is a subdivision of early stage financing?

a.
b.
c.
d.

Mezzanine or development capital

Bridge or expansion
Seed capital
Hands-on-nurturing

39. Venture capital provides finance through__________ .

a. Equity
b. Debt
c. Receivables
d. Angel funding
40. Until 1985, which institutions have played the role of venture capitalist in
India in the absence of an organised venture capital industry ?
a.
b.
c.
d.

Industrial Finance Corporation of India (IFCI)

Risk Capital Foundation (RCF)
Individual investors and Development Finance Institutions (DFIs)
Technology Development and Information Company of India (TDICI)

41. Identify the true and false statements:

1.
Seed capital investment is basically a small amount that an
entrepreneur receives as a confirmation that they are eligible for a
start up loan.
Early stage financing is typically for a company which has
already started production and distribution and also has established
inventories.
2.

a.
b.
c.
d.

1T, 2T
1T,2F
1F,2F
1F,2T

42. Identify true and false statements.

Issue management is a fee-based service
provided by financial institutions.
1.

Corporate counselling is a fee-based service

provided by merchant bankers to corporate
enterprises.
2.

a.
b.
c.
d.

1T,2T
1F,2F
1T,2F
1F,2T

43. Which among the following is a fraudulent or

unfair practice?
Indulges in an act which creates correct
impression of trading in securities market.
a.

Coordinates the preliminary distribution of

securities and acquires direct subscription from many
investors.
b.

Advertises information in a correct manner which

can influence the decision of the investors.
c.

Agrees to pay any person, any money for

inducing such person for dealing in any security with the
object of causing fluctuation in the price of such security.
d.

44. Which among the following is true?

The portfolio manager safeguards the interest of
holders of debentures
a.

The registrar to an issue assists companies in

deciding the basis of allotment of securities in
consultation with stock exchanges.
b.

The banker to an issue undertakes the

management and administration of portfolio of securities
and funds of clients on their behalf.
c.

The underwriter finalises the allotment of

securities and dispatching allotment letters.
d.

45. Identify the true and false statements.

The pricing of issue is one of the many ways by which
companies can hike their capital.
1.

The concept of Qualified Institutional Placements (QIP) was

introduced in India to prevent the export of domestic equity
markets, and encourage on-shore investment.
2.

a.
b.
c.
d.

T,F
T,T
F,F
F,T

46. Which of the following is true?

1.
Issue management helps the corporate clients to raise funds
from the capital market.
The objective of post-issue management is the issuance and
pricing of shares.
2.

a.
b.
c.
d.

1T, 2T
1T,2F
1F,2F
1F,2T

47. Identify true and false statements.

The lead merchant banker files the offer documents of size
up to Rs. 25 crores with the regional office of SEBI under
the jurisdiction of the registered office of the issuer
company.
2. An unlisted company can ask for relaxation from SEBI in
the applicability of the rule, for listing its shares.
1.

T,F
T,T
F,F
F,T
48. by
Which of the following is not a operational guideline issued
the ? SEBI for the standard disclosure of the offer document
a.
Submission of draft and final offer document
b. c. Offer document made public
d. Instructions on post-issue obligations
e. Registration with Association of Merchant Bankers of India
(AMBI).
49. Which of the following is a false statement?
a.
b.
c.
d.

The depository involves in all transfers

resulting from the settlement of transactions.
a.

The depository helps in speeding up the

transfer process by registering the rights of shares in
the name of the depository.
b.

The depository is intimated electronically

within 60 days when any dematerialisation request is
rejected.
c.

The depository maintains current accounts for

participants.
d.

50. Identify the true or false statements.

Institutional investors are permitted to do
day trading or square off their transactions.
1.

The members permitted to short sell are all

sections of investors such as retail and institutional
investors.
2.

a.
b.
c.
d.

1T, 2T
1T,2F
1F,2T
1F,2F

51. Which of the following are advantages of leasing?

The lessors ownership is fully secured
2.
Lessee is not capable of adding or altering anything to the
leased asset
3.
The lessor being the owner of the asset bears the risk of
obsolescence and the lessee is free on this score.
4.
Double sales tax can be charged once at the time of purchase
of the asset
1.

a. 1, 3
b. 2, 4
c. 1, 2
d. 3,4

52. State which of the following statements are true or false.

In some cases the lease period may stretch over the entire
economic life of the asset which we call as financial lease
2.
The rentals are the payment which the lessor and the lessee
fix after the contract is prepared.
1.

1T, 2F
1F,2F
1T,2T
1F,2T
53. The commitment for minimum lease payments
under________ or _____ with a term of more than one
year should be disclosed in summary form giving the
amounts and periods in which the payment become
due.
a. Sales-type lease , opeating leases
b. Direct financing lease, sales-type lease
c. Finance lease, non cancellable leases
d. AS-19, IAS-17
a.
b.
c.
d.

54. Which of the following are exempt from the

accounting policies and disclosures in finance and
operating leases?
a. Leases of land, if title is not transferred
b. If the title to the land is not likely to pass to the
lessee, then the rewards and risks of ownership has
not substantially passed
c. The option to continue the lease for a secondary term
at significantly below market rent.
d. Lease agreements to use property such as land
55. Which one of the following is true regarding financial lease?
a. Financial lease is generally for a shorter period and is
cancellable.
b. The cost of maintenance of equipment is borne by the lessee.
c. The lessee has the option to acquire the asset by paying the first
rental
d. The lease cannot be renewed for a further period of time.

56. Identify true and false statements.

The leasing intermediaries are financial institutions such as
commercial banks, insurance company, NBFC (non-banking financial
companies), and other financial institutions.
1.

Financial appraisal is a financial evaluation technique to

determine which possible alternative is economically viable. a. 1T, 2F
2.

b. 1F, 2F
c. 1F, 2T
d. 1T, 2T

57. Identify the true and false statements.

In leasing, lessee is the owner of the asset and ownership is
transferred to the lessee.
2.
In hire-purchase financing, the ownership of the asset is with the
finance company.
1.

a. 1T, 2T
b. 1T, 2F
c. 1F, 2T
d. 1F, 2F

58. Identify the true and false statements.

1. The consumer credit transaction consists of two parties. They are bipartite
and tripartite.
2.The customer can terminate the agreement before the payment of the full
amount.
a.
b.
c.
d.

1T, 2T
1T, 2F
1F, 2T
1F, 2F

59. Identify true and false statements

1.
In India, insurance business can be undertaken only by a public
company, a cooperative society, a body corporate other than a private
company incorporated in any country outside India.
The registration with the IRDA is not mandatory for all insurance
companies to carry on business in India.
2.

1T, 2T
1T,2F
1F,2F
1F,2T
60. Identify true and false statements
a.
b.
c.
d.

1. Structure of regulations relating to obligations of insurers to rural or

social sectors is one of the functions of IRDA.
2. Endowment policy gives assurance that the benefits under the
policy will be given to the beneficiaries on the death of the policy
holder within the selected term or on its maturity date.
T, F
T, T
F,F
F,T
61. Match the following: First
set:
a.
b.
c.
d.

A. Issue management
B. Corporate counselling
C. Project finance
D. Working capital

Second set:
1.
To arrange the funds from non-traditional sources
such as through issue of debentures.
To obtain approval for the issue from the SEBI.
3.
To provide advice on procedural aspects of project
implementation.
2.

To ensure effective running of a corporate enterprise

through efficient management of finance.
4.

a. A-4, B-1, C-3, D-4

b. A-3, B-4, C-2, D-1
c. A-2, B-4, C-3, D-1
d. A-1, B-2, C-4, D-3

62. Match the following:

First set:
A. Debenture trustee
B. Broker to an issue
C. Underwriter
D. Portfolio manager

Second set:
Take up shares specified in the underwriting
agreement of the public, who fails to subscribe them.
1.

Has the right to carry on with the sale of secured

property in case of default by the issuer of security.
2.

Takes decisions regarding investments and policy,

allocating assets for individuals and balancing risk
against performance.
3.

Coordinates the preliminary distribution of

securities and acquire direct subscription from many
investors.
4.

a. A-4, B-1, C-3, D-2

b. A-3, B-1, C-4, D-2
c. A-2, B-4, C-3, D-1
d. A-1, B-3, C-2, D-4

63. Match the following:

First set:
A. Disclosure and creation of charge
B. Other requirements
C. Requirement of letter of option
D. Requirement of credit rating
Second set:
1.
The company must file a copy of notice of the resolution with
the SEBI.
The offer document must state the assets on which the security
is created.
2.

A rights issue of all debt instruments is made only when the

credit rating of minimum investment grade is obtained from two
credit rating agencies.
3.

Companies cannot issue Fully Convertible Debentures (FCDs)

having a conversion period of more than 36 months.
4.

a. B-1, A-2, D-3, C-4

b. C-1, D-2, B-3, A-4
c. A-2, B-4, C-1, D-3
d. D-1, A-2, C-3, B-4

64. Match the following:

The steps involved in the book building process:
First set:
A. Step 1
B. Step 2
C. Step 3
D. Step 4

Second set:
The draft prospectus is filed with SEBI to provide a legal
standing.
1.

The issuer company proposing an IPO appoints a lead

merchant banker as a Book Running Lead Manager (BRLM).
3.
A definite period is set as the bid period and BRLM conducts
awareness campaigns like advertisement, road shows and so on.
2.

Primarily, the issuer company consults with the BRLM in

drawing up an offer document which does not mention the price of
the issues, but consists of other details about the size of the issue,
companies past history, and a price band.
4.

a. A-2, B-4, C-1, D-3

b. A-3, B-4, C-1, D-1
c. A-3, B-1, C-4, D-2
d. A-2, B-3, C-4, D-1

65. Identify true and false statements.

1.
A company must enter into an agreement with the stock
exchange and must specify their mutual duties or rights or
responsibilities.
Green Shoe Option (GSO) is an option where a company can
retain a part of the over-subscribed capital by issuing additional
shares.
2.

In an IDR, foreign companies can not issue shares, to an

Indian depository.
3.

The basis of pricing of the issue must be disclosed in the offer

document where the issuer discloses information related to the
quantitative and qualitative factors justifying the issue price.
4.

a.
b.
c.
d.

1T, 2T, 3T, 4F

1T,2T,3T,4T
1T,2T,3F,4T
1F,2T,3T,4T

66. Match the following: First

set:
A. Due diligence
B. Memorandum of understanding
C. Inter-se allocation of responsibilities
D. Due-diligence certificate
Second set:
1.
Submitted to the Board and disclosed in the offer document if
the issue is handled by more than one merchant banker.
2.
Investigates or audits potential investments to verify all
material facts to a sale.
Qualified people like lawyers, chartered accountants, and
investment bankers examine every aspect of the target company
usually before mergers, acquisitions, strategic investments and so
on.
3.

An agreement between the lead manager and the issuing

company.
4.

a. B-1, A-2, D-3, C-4

b. C-1, D-2, B-3, A-4
c. A-2, B-4, C-1, D-3
d. D-1, A-2, C-3, B-4

67. Match the following:

SEBI regulations provided for the four categories of merchant
bankers:
First set:
A. Category I
B. Category II
C. Category III
D. Category IV

Second set:
They are allowed to act as an underwriter, advisor, and
consultant. Capital adequacy norm for this category is Rs. 20 lakh.
1.

They are allowed take up activities related to issue

management. Capital adequacy norm for this category is Rs. 5
crores.
2.

They are allowed to act as an advisor or consultant. There is

no capital adequacy norm for this category of merchant banker.
3.

They are allowed to carry the roles of advisor, consultant,

comanager, underwriter and portfolio manager. Capital adequacy
norm for this category is Rs. 50 lakh.
4.

a. A-2, B-4, C-1, D-3

b. A-3, B-4, C-1, D-1
c. A-3, B-1, C-4, D-2
d. A-2, B-3, C-4, D-1

68. Match the following:

First set:
A. Compliance officer
B. Custodian
C. Participant
D. Sub broker

Second set:
1.
Administrates and protects the assets of the clients
Monitors the compliance of the SEBI ACT
Acts as an agent on behalf of a stockbroker
Directly deals with the depository directly or on behalf of their clients

2.
3.
4.

a. A-1, B-4 , C-3, D-2

b. A-2, B-1, C-4, D-3
c. A-3, B-4, C-2, D-1
d. A-4, B-2, C-1 D-3

69. Identify the true or false statements.

Future contracts are structures for the delivery of
the underlying assets on an agreed future date.
2.
Future contract is a transferable specific delivery
forward contract.
3.
Future contracts have high risk and low liquidity.
4.
Future contracts are non-transferable legal
agreements.
1.

a.
b.
c.
d.

1T, 2F, 3T, 4F

1F, 2T, 3F, 4T
1T, 2T, 3F, 4F
1F, 2F, 3T, 4T

70. Match the following

First set
A. Domestic lease
B. Leveraged lease
C. International lease
D. Single investor lease
Second set
1.
Import lease and cross-border lease are its sub classifications.
2.
The leasing company buys the asset through considerable
borrowing.
3.
The leasing company manages the fund of the entire
investment by an appropriate mix of debt and equity funds.
4.
All parties mentioned in the agreement are the residents of the
same country.
a. A-2, B-1, C-4, D-3
b. B-3, A-2, D-4, C-1
c. D-3, C-1, A-4, B-2
d. C-1, A-3, B-4, D-2

71. State whether the following statements are true or false.

1.
The government decides which company is eligible for
leasing.
The NBFCs play a vital role in expanding the access to
financial services and enhancing competition.
2.

To coordinate, control and regulate the functioning of all

NBFCs, the Reserve Bank of India (RBI) issues direction from time
to time under the RBI Act.
3.

The AFC is a financial institution which carries on its major

business like the financing of physical assets that support economic
activities
4.

a.
b.
c.
d.

1T, 2F, 3T, 4F

1F, 2T, 3T, 4T
1F, 2T, 3T, 4F
1T, 2T, 3T, 4T

72. Match the following statements

First set
A. Issuing of Letters of Credit
B. Factoring
C. Lease rentals
D. Asset Finance Company
Second set
1.
an element of leasing
2.
a fee based financial service
3.
an asset based financial service 4. a classification of NBFCs
a. A-2, B-3, C-1, D-4
b. B-3, C2, A-1, D-4
c. D-1, B-2, A-4, C-3
d. C-2, B-4, A-1, D-3

73. Which of the statements are true and false?

1.
A lease which transfers all the risks and rewards incident
to ownership of an asset is finance lease
Conditions in the lease may specify that an entity has
only a limited disclosure to the risks and benefits of the leased
asset
2.

The lessor has the choice to purchase the asset at a cost

that is expected to be lower than its fair value and such that the
option is likely to be exercised.
3.

The highest lease payments need to be allocated between

the land and the building component in proportion to their
relative fair values of the lease holding interests at the
beginning of the lease.
4.

a.
b.
c.
d.

1T, 2T, 3F, 4F

1F,2T,3F,4T
1T,2F,3T,4F
1T,2T,3T,4F

74. Match the following: First

set:
A. Guaranteed residual value
B. Lease term
C. Finance lease
D. Lease

Second set:
1.
Accounting or Reporting Framework and Taxation of
Leasing.
It is sure by the lessee to pay the maximum amount of
the guarantee; and in the case of the lessor, the part of the
residual value which is guaranteed by the lesse or an
independent third party who is financially able of discharging
the obligations under the guarantee.
2.

Is is an agreement calling for the lessee (user) to pay

the lessor (owner) for use of an asset for an agreed period of
time.
4.
A lease which transfers all the risks and rewards
incident to ownership of an asset.
3.

a. A-1,B-4,C-3,D-2
b. A-3,B-2,C-1,D-4
c. A-3,B-4,C-2,D-1
d. A-2, B-1, C-4, D-3

75. Match the following:

First set:
A. Break-even lease rental
B. Process of financial appraisal in a lease transaction
C. Leveraged lease
D. Operating lease
Second set:
1.
Under this type of leasing, the lessor borrows funds from a
financer to finance the asset and leases it to a lessee.
2.
It is the rental at which the lessee is indifferent between lease
financing and borrowing and buying.
Service lease
4.
Appraisal of the client in terms of financial strength and credit
worthiness
3.

a. A-2, B-1, C-4, D-3

b. A-4, B-3, C-1,D-2

c. A-2, B-4, C-1, D-3
d. A-2, B-4, C-3, D-1