Exam Bite (Part-4)

• An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis.
• Gilt funds are those funds which invest exclusively in government securities to reduce risk factor.
• A load fund is one that charges a percentage of NAV for exit. That is, each time one sells units in the fund, a charge will be payable. This charge is used by the mutual fund for marketing and distribution expenses.
• Tier two (or Tier II) capital, also known as supplementary capital refers to one of components of regulatory capital. The elements of Tier II capital include undisclosed reserves, revaluation reserves, general provisions and loss reserves, hybrid capital instruments, subordinated debt and investment reserve account.
• The risk that the interest rate of different assets, liabilities and off-balance sheet items may change in different magnitude is termed as basis risk.
• Hedging means taking actions that would either eliminate or reduce exposure to risk.
• A forward contract is an agreement between two parties to buy or sell an agreed amount of a commodity or financial instrument at an agreed price, for delivery on an agreed future date. Difference between futures contract and forward contract is that a forward contract is not transferable or exchange tradable, no standardized terms and no margin is exchanged.
• A nostro account is our account in a different country and a vostro account is a foreigner's account in our country. A nostro account is always in foreign currency while a vostro account is in Home currency.
• Under Written Down Value Method of depreciation , amount of depreciation varies every year.
• Credit derivatives are defined as off-balance sheet financial instruments that permit one party (beneficiary) to transfer credit risk of a reference asset, which it owns, to another party (guarantor) without actually selling the asset
• The term "Balance of Trade" means the difference between the amount of the imports and exports of a country.
• Floating debt denotes that part of the public debt which consists of short term borrowings by the Government.
• The definition of the priority sector was first formalised in 1972 by Reserve Bank of India.
• NIKKEI is a share price index of Tokyo share market.