Crack the NRB Exams: 30 Essential Banking & Finance MCQs with Answers

If you are preparing for the Nepal Rastra Bank (NRB) Officer-level exams or aiming for a career in commercial banking in Nepal, mastering the core principles of Banking and Finance is non-negotiable. This blog post provides a comprehensive set of 30 high-yield Multiple Choice Questions (MCQs) designed to mirror the current exam patterns of NRB, ADBL, NBL, and RBB.

Our curated list covers essential topics, including Financial Management (EOQ, Perpetuity, and Beta Repurchase), NRB Directives, and international trade terms like UCPDC and Letters of Credit (LC). We have also included vital updates on the Nepalese financial landscape, such as the roles of the Nepal Bankers Association (NBA) and the historical capital requirements of the central bank.

NRB Officer Exam Preparation: 25 MCQs on Legal & Regulatory Framework 

1) Beta company’s number of shares outstanding and market price per share is 100,000 shares and Rs. 50 respectively. If the company wants to purchase 20,000 shares, the equilibrium repurchase price will be:

a) Rs. 50

b) Rs. 62.5

c) Rs. 65.5

d) Rs. 70

 

2) Sales is regarded as ..... in using the econometric model of sales forecasts.

a) Independent variable

b) Dependent variable

c) Not important

d) Key variable

 

3) A stream of equal payment occur at equal intervals of time to infinity is called:

a) Present value of annuity

b) Future value of annuity

c) Cash flow

d) Perpetuity

 

4) Short-term creditors would likely be most interested in a firm’s .....

a) Debt equity ratio

b) Quick ratio

c) Interest coverage ratio

d) Basic earning power

 

5) Option to abandon is:

a) Call option

b) Put option

c) Both (a) and (b)

d) None of these

 

6) In an LC transaction, the bank that is authorized to honour the payment claims in settlement of negotiation/acceptance/ payment lodged with it by the negotiating bank is:

a) Negotiating Bank

b) Confirming Bank

c) Remitting Bank

d) Reimbursing Bank

 

7) An agreement to buy or sell currency at the current exchange rate is known as:

a) Option

b) Spot transaction

c) Hedging

d) Forward Transaction

 

8) In the constant growth dividend valuation model, the required rate of return on a common stock can be shown to be equal to the sum of the dividend yield plus .....

a) Yield-to-maturity

b) Cost of capital

c) Present value yield

d) Capital gain yield

 

9) A firm places an order of 300 units EOQ size, which has a safety stock level of 50 units. Its average inventory level is ..... units.

a) 350

b) 250

c) 200

d) 125

 

10) The act of transferring a document or property rights under a contract or benefits under a trust to another person:

a) Mandate

b) Trust

c) Assignment

d) Declaration

 

11) A person or organization that buys an issue from a corporation and sells it to investors is known as:

a) Issue manager

b) Underwriter

c) Portfolio manager

d) Share register

 

12) Basel II norms are associated with ..... among the following sectors:

a) Banking

b) Insurance

c) Share market

d) All of these

 

13) ..... is that portion of the authorized capital issued to the public for subscription.

a) Paid-up capital

b) Issued capital

c) Subscribed capital

d) Called up capital

 

14) The price at which a bond is bought or sold in the market is known as its:

a) Price value

b) Real bond value

c) Market value

d) Bond value

 

15) The main characteristics of intangibility, inseparability, heterogeneity, perish-ability pertain to?

a) Services

b) Product

c) Management

d) MIS

 

16) Helsinki Stock Exchange is the stock market of:

a) Australia

b) Finland

c) Norway

d) Germany

 

17) Everest Bank was established in collaboration with:

a) Central Bank of India

b) State Bank of India

c) Punjab National Bank

d) Habib Bank Limited

 

18) According to NRB directives, banks and Financial institutions should keep accounts on:

a) IAS Standard

b) Current Yield of Bond

c) NAS Standard

d) All of these

 

19) CAR stands for:

a) Capital Adequacy Ratio

b) Current Assessment Ratio

c) Capital Application Ratio

d) Current Assets Ratio

 

20) Number of A-class commercial banks in Nepal, as per Nepal Rastra Bank report of the mid July 2021 are:

a) 27

b) 32

c) 29

d) 30

 

21) At the establishment time authorized capital of Nepal Rastra Bank was:

a) 16 million

b) 10 million

c) 8 million

d) 25 million

 

22) Who is the current president of the Nepal Bankers Association (NBA)?

a) Anil Kumar Upadhyay

b) Sunil KC

c) Bhuvan Dahal

d) Anupama Kunjeli

 

23) When CRR/ SLR increases, the money supply:

a) Increases

b) Decreases

c) Remains constant

d) None of these

 

24) Tenure of the Governor in Nepal Rastra Bank is for:

a) 1 year

b) 5 years

c) 6 years

d) 8 years

 

25) Cheap money policy is generally adopted during:

a) Inflation

b) Deflation

c) Boom

d) Recession

 

26) Functions of a bank are:

a) Agency services

b) Advancing loans

c) Accepting deposits

d) All of these

 

27) In international trade, Letters of Credit are governed by:

a) NRB guidelines

b) Country’s law

c) UCPDC

d) FEDAN

 

28) How many members are appointed to an audit committee of NRB?

a) 7

b) 5

c) 3

d) 2

 

29) The excess of current assets over current liabilities is known as:

a) Net worth

b) Working Capital

c) Liquid Assets

d) Net Assets

 

30) Two-by-Two-by-Two is related to:

a) International Trade

b) Technology

c) Foreign Exchange

d) None                  

Banking and Finance Answer Key:

Q.No	Ans	Explanation
1	b	The equilibrium repurchase price is calculated as P* = {S x P} / {S - n}, where S is shares outstanding (100,000), P is price (Rs. 50), and n is shares to buy (20,000). Result: 62.5.
2	b	In econometrics, Sales is the Dependent Variable because its value depends on factors like price, advertising, or GDP (Independent Variables).
3	d	Perpetuity is a constant stream of identical cash flows with no end date.
4	b	Short-term creditors look at the Quick Ratio (Acid-test ratio) to see if a firm can pay immediate debts without selling inventory.
5	b	An Option to Abandon acts like a Put Option because it gives the right to "sell" or exit a project if it becomes unprofitable.
6	d	The Reimbursing Bank is the one designated to settle payments between the negotiating and issuing banks in a Letter of Credit (LC).
7	b	A Spot Transaction is an agreement to exchange currency at the "on the spot" or current market rate.
8	d	Per the Gordon Model, ke = D1 /P0 + g. The g represents the Capital Gain Yield (growth rate of the stock price).
9	c	Average Inventory = (EOQ/ 2) + Safety Stock. Here, (300/2 + 50) = 200 units. EOQ stands for Economic Order Quantity.
10	c	An assignment is the legal transfer of rights or benefits (like an insurance policy) from one party to another.
11	b	An Underwriter guarantees the sale of a new stock issue by purchasing it from the issuer to resell to the public.
12	a	Basel II is an international set of Banking regulations for capital adequacy and risk management.
13	b	Issued Capital is the specific portion of authorized capital offered to the public for purchase.
14	c	Market Value is the price at which a bond is currently trading in the secondary market.
15	a	These four characteristics (Intangibility, Inseparability, Heterogeneity, Perishability) are the defining traits of Services.
16	b	The Helsinki Stock Exchange (Nasdaq Helsinki) is located in Finland.
17	c	Everest Bank Limited was established in 1994 in a joint venture with Punjab National Bank (PNB), India.
18	c	Banks in Nepal must follow NAS (Nepal Accounting Standards) / NFRS (Nepal Financial Reporting Standards) as per NRB (Nepal Rastra Bank).
19	a	CAR stands for Capital Adequacy Ratio, a measure of a bank's capital relative to its risk-weighted assets.
20	a	As of mid-July 2021, there were 27 commercial banks (Class A) in Nepal. (Note: This number has decreased since then due to mergers.
21	b	At its establishment in 1956, the authorized capital of NRB was Rs. 10 million.
22	b	Sunil KC (CEO of NMB Bank) is the current president of the NBA (Nepal Bankers Association) as of 2023-2024.
23	b	When CRR (Cash Reserve Ratio) or SLR (Statutory Liquidity Ratio) increases, banks have less money to lend, so the Money Supply decreases.
24	b	As per the NRB Act 2058, the tenure of the Governor is 5 years.
25	d	A Cheap Money Policy (low interest rates) is used during a Recession to stimulate spending and investment.
26	d	Banks perform primary functions (deposits/loans) and secondary/agency functions.
27	c	Letters of Credit are governed by UCPDC (Uniform Customs and Practice for Documentary Credits) issued by the ICC.
28	c	The NRB Audit Committee consists of 3 members (a board member as chair and two experts).
29	b	Working Capital (specifically Net Working Capital) is defined as Current Assets minus Current Liabilities.
30	c	Two-by-Two-by-Two is a rule in Foreign Exchange (FX) referring to the standard settlement (T+2) for spot transactions.