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DEMO FOR PAPER 1 –ABM-CAIIB ; Updated Upto 31.07.2020
INDEX
CHAPTER PAGE NO
MODULE A
1. DEMAND & SUPPLY THEORY 2-9
2. Overview of Indian Economy ( Including money, banking , 10-33
inflation, employment, interest & National income & solved
numerical of GDP & Union Budget)
MCQ’S ON ‘MODULE A’ 33-39
MODULE B
1. TIME VALUE OF MONEY 40-51
2. LINEAR PROGAMMING 52-56
3. PROBABILITY 57-59
4.SAMPLING METHODS & NORMAL DISTRIBUTION 60-73
5. TIME SERIES 74-77
6. CORRELATION & REGRESSION 78-85
7. SIMULATION 86-88
8. BOND VALUATION 89-97
MCQ’S ON ‘MODULE B’ 97-101
MODULE C
1. HR MANAGEMENT 102-145
MCQ’S ON ‘MODULE C’ 145-153
MODULE D
1. CREDITS & ITS MANAGEMENT 154-162
2. TERM LOAN, LOAN ADMINISTRATION –PRE & POST 163-176
3. WORKING CAPITAL 177-198
4. RATIO ANALYSIS 199-211
MCQ’S ON ‘MODULE D’ 211-217
MODULE A
CHAPTER 1
DEMAND & SUPPLY THEORY
Introduction
Economics may appear to be the study of complicated tables and charts, statistics and numbers, but, more
specifically, it is the study of what constitutes rational human behavior in the endeavor to fulfill needs and
wants. As an individual, for example, you face the problem of having only limited resources with which to
fulfill your wants and needs, so, with your money, you must make certain choices. You’ll probably spend
part of your money on rent, electricity, and food. Then you might use the rest to go to the movies and/or
buy a new pair of jeans. Economists, interested in the choices you make, inquire into why, for instance,
you might chose to spend your money on a new DVD player instead of a replacing your old TV. They
would want to know whether you would still buy a carton of cigarettes if prices increased by Rs.2 per pack.
The underlying essence of economics is trying to understand how both individuals and nations behave in
response to certain material constraints.
……………………….
V. NATIONAL INCOME AND RELATED AGGREGATES
Sectoral Composition of India’s National Income
According to Colin Clark, the economic development of any country is the transitions from the development
of primary sector to the secondary manufactured sector. Such as transformation from primary to secondary
sectors involve development of factors of production, skill, technology, resource utilization, human
resource development and careful planning. The primary sector is made up of activities like agriculture,
forestry, fishing, mining etc. The secondary sector (Industry sector) comprises manufacturing, food
processing, transportation equipment, petroleum, textiles, mining, machinery, chemicals, steel, cement and
many others. The tertiary sector (Service sector) includes construction, trade, hotels, transport, restaurant,
communication and storage, social and personal services, software, community, insurance, financing,
business services, and real estate etc.
NATIONAL INCOME : It is the money value of all final goods and services produced within the domestic
territory of a country in an accounting year plus net factor income from abroad.
Gross Domestic Product.:- The total market value of all final goods and services produced in a country in a
given year, equal to total consumer, investment and government spending, plus the value of exports,
minus the value of imports.
1. Gross Domestic Product (GDP): Gross Domestic Product (GDP) is the total market value of all final
goodsandservices currently produced within the domestic territory of a country in a year.
Four things must be noted regarding this definition.
First, it measures the market value of annual output of goods and services currently produced. This implies
that GDP is a monetary measure.
Secondly, for calculating GDP accurately, all goods and services produced in any given year must be
counted only once so as to avoid double counting. So, GDP should include the value of only final goods
andservicesandignores the transactions involving intermediate goods.
Thirdly, GDP includes only currently produced goods and services in a year. Market transactions involving
goodsproducedin the previous periods such as old houses, old cars, factories built earlier are not included
in GDPofthecurrent year.
Lastly, GDP refers to the value of goods and services produced within the domestic territory of a country
bynationals or non-nationals.
2. Gross National Product (GNP): Gross National Product is the total market value of all final goods and
services produced in a year. GNP includes net factor income from abroad whereas GDP does not.
Therefore,
GNP=GDP+Netfactorincomefromabroad.
Net factor income from abroad = factor income received by Indian nationals from abroad – factor income
paid to foreign nationals working in India.
3. Net National Product (NNP) at Market Price: NNP is the market value of all final goods and services
after providing for depreciation. That is, when charges for depreciation are deducted from the GNP we get
NNPatmarketprice.Therefore’
NNP=GNP–Depreciation
Depreciation is the consumption of fixed capital or fall in the value of fixed capital due to wear and tear.
4.Net National Product (NNP) at Factor Cost (National Income): NNP at factor cost or National Income
is the sum of wages, rent, interest and profits paid to factors for their contribution to the production of
goodsandservices in a year. It may be noted that:
NNPatFactorCost=NNPatMarketPrice–IndirectTaxes+Subsidies.
Solved Case study:
1. Calculate Gross National Product at market price and Personal Disposable income from the following
data: (Rs crores)
(i) Subsidy 20 (ii) Net factor income from abroad (-) 60 (iii) Consumption of fixed capital 50 (iv)
Personal tax 110 (v) Savings of private corporations 40 (vi) Dividend 20 (vii) Indirect tax 100 (viii)
Corporation tax 90 (ix) Net national disposable income 1,000 (x) National debt interest 30 …
………………………………………………………
Solved Illustration 1: Following following figures of X igures of X country has been given:country has been given:
1. Tax Revenue (net 1. Tax Revenue (net to Centre) to Centre) 186982 186982
2. Non-tax Revenutax Revenue e 76896 76896
3. Recoveries o3. Recoveries of Loans f Loans 67265 67265
4. Other Receipts (4. Other Receipts (capital nature) capital nature) 169 16953
5. Borrowings an5. Borrowings and Other Ld Other Liabilities iabilities 123272 123272
6. Plan Expenditure
On Revenue Account On Revenue Account 78638 ….. 78638 …..
MODULE A ECONOMICS MCQ’S:
1. 1. WWhich of the hich of the following is notfollowing is not a non a non-price determinant of demand?
42 Here are t42 Here are the equationhe equations for the demand as for the demand and nd supply supply curves. Compute the ecurves. Compute the equilibrium price vquilibrium price value:alue:
Demand curve: Q =3300−2PQ =3300=3300-2P………
d d
43. 43. 43. A A A local local local grocery grocery grocery store store store orders orders orders 200 200 200 cases cases cases of of of Pepsi Pepsi Pepsi each each each weeweeweek k k and and and sells sells sells them them them at at at a a a price price price of of of Rs.6.00 Rs.6.00 Rs.6.00 perperper
case. case. At At the the end end of of the the first first week, week, they they have have only only soldsold 160 160 ccases. Wases. What hat economic economic situation situation is is the the grocerygrocery
store facing and……………
…………………………………………………………………………………………
MODULE B
CHAPTER 1: TIME VATIME VALUE OF MONEYLUE OF MONEY
A. Why Mathematics in Banking……………….……………….
B. Time Value of Money
Future value of Annuity:
The The The Future Future Future Value Value Value of of of an an an Annuity Annuity Annuity is is is calculated calculated calculated at at at the the the end end end of of of the the the period period period in in in which which which the the the last last last annuity annuity annuity payment payment payment
occurs. occurs. occurs. The The The Future Future Future Value Value Value of of of the the the AnnuityAnnuityAnnuity is is is equal equal equal to to to the the the sum sum sum of of of the the the future future future values values values of of of the the the individual individual individual annuity annuity annuity
payments at tpayments at that time. Thus, the future vhat time. Thus, the future valuealue of a five yof a five year annuity ear annuity is computed at tis computed at the end of year five.he end of year five. This This
can can can be be be found found found in in in one one one step step step through through through the the the use use use of of of the the the following following following equation: equation: equation: It It It is is is also also also be be be called called called as as as FV FV FV of of of Ordinary
Annuity
where
FVA = The PreseFVA = The Present Value of the Ant Value of the Annuitynnuity
PMT = The Annuity Payment
r = The Interest or Discount Rate
t = The Number t = The Number of Years (also thof Years (also the Number of Ane Number of Annuity nuity Payments)Payments)
Example:-Ordinary annuitOrdinary annuity for Rs.25 for y for Rs.25 for 3 years at 3 years at 9%9%
Example:- Compute Compute Compute the the the future future future value value value of of of Rs.8,880 Rs.8,880 Rs.8,880 invested invested invested every every every year year year if if if the the the appropriate appropriate appropriate rate rate rate is is is 11.6% 11.6% 11.6% and and and
you invest tyou invest the money for 18 yhe money for 18 years with the first ears with the first payment made opayment made one year fromne year from now. now.
By applying the abovBy applying the above formula we wie formula we will get the following all get the following answer:nswer:
18
FVA = Rs.8,880[ {1+0.1160) – 1}/ 0.1160] = 1}/ 0.1160] = Rs. 475,38Rs. 475,386/-
Annuity Due FV:
where
FVA = The PreseFVA = The Present Value of the Ant Value of the Annuitynnuity
PMT = The Annuity Payment
r = The Interest or Discount Rate
t = The Number t = The Number of Years (also thof Years (also the Number of Ane Number of Annuity nuity Payments)Payments)
CHAPTER 4 :
SASAMMPLING METPLING METHODS & HODS & NORMAL DISTRIBNORMAL DISTRIBUTIONUTION
I) INTRODUCTION:-
WWWhen thhen thhen the set of all possible ie set of all possible ie set of all possible items in a population is vtems in a population is vtems in a population is very large it may be ery large it may be ery large it may be too costly or time consuming to do too costly or time consuming to do too costly or time consuming to do
a ca ca comprehensive analysis of omprehensive analysis of omprehensive analysis of all of all of all of the items. the items. the items. For For For examplexamplexample, during e, during e, during an audit, there an audit, there an audit, there is juis juis just not st not st not enough time or enough time or enough time or
resources to talk to everververy y y auditee, auditee, auditee, witness witness witness every every every process process process step step step or or or look look look at at at every every every quality quality quality record. record. record. If If If the the the
customer base is customer base is customer base is large, it may be tlarge, it may be tlarge, it may be too costly oo costly oo costly to survey all the custoto survey all the custoto survey all the customers to determine themers to determine themers to determine their satisfaction levir satisfaction levir satisfaction level. el. el.
Evaluating Evaluating or or estimating estimating attributes attributes or or characteristics characteristics of of the the eentire ntire system, system, process, process, product product or or project project
through a represethrough a representative sample can bntative sample can be more efficiee more efficient…………nt…………
Point and Interval Estimation:
The The The statistical statistical statistical technique technique technique of of of estimating estimating estimating unknown unknown unknown population population population parameters parameters parameters from from from the the the corresponding corresponding corresponding sample sample sample
statistic is called estimation. An estimmation. An estimmation. An estimate of a paraate of a paraate of a parameter can be meter can be meter can be made in two wmade in two wmade in two ways :………..ays :………..ays :………..
Example 1 :
A A A sample sample sample survey survey survey of of of 81 81 81 documentaries documentaries documentaries reveal reveal reveal an an an average average average length length length of of of 90 90 90 minutes and minutes and minutes and a a a standard standard standard deviation deviation deviation of of of
20 minutes. Find t20 minutes. Find the interhe interval estimate……val estimate…………..……..
Central Limit Theorem:
If a random andom andom sample sample sample of of of n n n observation observation observation is is is selected selected selected from from from any any any population, population, population, then, then, then, when when when the the the sample sample sample sizesizesize is is is
sufficiently sufficiently sufficiently large large large (n>=30) (n>=30) (n>=30) the the the sampling sampling sampling distributidistributidistribution on on of of of the the the mean mean mean tends tends tends to to to approximate approximate approximate the the the normal normal normal
distribution. distribution. The The larger larger the the sample sample size, size, n, n, the the better better will will be be ththe e nornormal mal approxiapproximation mation to to the the sampling sampling
distribution of tdistribution of the mean. Then, agahe mean. Then, again……………in……………
Sampling From a Finite Population:
You You You may may may recall recall recall that that that a a a finite finite finite population population population is is is a a a population population population which which which has has has a a a fixed fixed fixed upper upper upper bound. bound. bound. For For For example, example, example, there there there
are 5,124 students enrolled at C.S.C. .S.C. .S.C. In In In cases cases cases of of of a a a finite finite finite population, population, population, an an an adjustment adjustment adjustment is is is made made made to to to the the the Z Z Z
equation equation equation for for for sample sample sample means means means (equation (equation (equation 3 3 3 above). above). above). The The The adjustment adjustment adjustment is is is called called called correction correction correction factor, factor, factor, or or or finite finite finite
population multiplier.
Correction Factor
A rule of thumb is that if sampling is done without replacement from a finite population and the done without replacement from a finite population and the done without replacement from a finite population and the sample size sample size sample size
n n n is is is greater greater greater than than than 5% 5% 5% of of of the the the population population population size size size N, N, N, i.e., i.e., i.e., n/N>0.05, n/N>0.05, n/N>0.05, then then then the the the correccorreccorrection tion tion factor factor factor should should should be be be used used used to to to
adjust the standard dadjust the standard deviation ( or standard eeviation ( or standard error) of the mrror) of the mean. Thus, the foean. Thus, the follllowing Z equation owing Z equation is used when is used when
samples are drawsamples are drawn from finite populn from finite population.ation.
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