QA Series No 56 - General Part 6

 

The Banking Tutor

Question Answer Series 2025

S No 56                                                                  03-09-2025

General -  Part 6 

235. Which is the first country to adopt Bitcoin as legal tender? 

El Salvador was the first country to adopt Bitcoin as legal tender. 

236. What is a Hot Wallet? 

A Hot Wallet is a cryptocurrency wallet that is always connected to the internet and cryptocurrency network. Hot wallets are used to send and receive cryptocurrency, and they allow you to view how many tokens you have available to use. 

237. What is PPP? 

PPP stands for Public Private Partnership. PPP means an arrangement between a government  owned entity on one side and a private sector entity on the other. 

238. What is BOOT? 

BOOT (Build, Own, Operate, Transfer) is a PPP Project model in which the public-sector partner may provide limited funding or some other benefit (such as tax exempt status) but the private-sector partner assumes the risks associated with planning, constructing, operating and maintaining the project for a specified time period.

239. What is BOLT or BLOT? 

BOLT (or BLOT)  means Build Own Lease & Transfer - The Private participant will lease the facility to the Government and the Government will pay the lease charges for a specific period and on the completion of the lease period the facility is transferred to the Government. 

240. What is a Turnkey Project? 

A Turnkey, a Turnkey project, or a Turnkey Operation (also spelled turn-key) is a type of project that is constructed so that it can be sold to any buyer as a completed product. This is contrasted with Build to Order, where the constructor builds an item to the buyer's exact specifications. 

241. What is a Share in Finance? 

A share represents a unit of equity ownership in a company. Shareholders are entitled to any profits that the company may earn in the form of dividends. They are also the bearers of any losses that the company may face. 

242. What are Equity Shares? 

Equity Shares are also known as ordinary shares and comprise the bulk of the shares being issued by a particular company. Equity shares are transferable and are traded actively by investors in stock markets. As an equity shareholder, you are not only entitled to voting rights on company issues but also have the right to receive dividends. 

243. What is Authorised Share Capital? 

Authorised Share Capital: Every company, in its Memorandum of Associations, requires to prescribe the maximum amount of capital that can be raised by issuing equity shares. The limit, however, can be increased by paying additional fees and after the completion of certain legal procedures. 

244. What is Issued Share Capital? 

Issued Share Capital: This implies the specified portion of the company’s capital, which has been offered to investors through the issuance of equity shares. For example, if the nominal value of one stock is Rs 400 and the company issues 20,000 equity shares, the issued share capital will be Rs 80 lakh. 

245. What is Subscribed Share Capital? 

Subscribed Share Capital: The portion of the issued capital, which has been subscribed by investors is known as subscribed share capital. 

246. What is Paid-up Capital? 

Paid-Up Capital: The amount of money paid by investors for holding the company’s stocks is known as paid-up capital. As investors pay the entire amount at once, subscribed and paid-up capital refer to the same amount. 

247. What are Bonus Shares? 

Bonus Shares: Bonus share definition implies those additional stocks which are issued to existing shareholders free-of-cost, or as a bonus. 

248. What are Rights Shares? 

Rights Shares: Right shares meaning is that a company can provide new shares to its existing shareholders - at a particular price and within a specific period - before being offered for trading in stock markets. 

249. What are Sweat Equity Shares? 

Sweat Equity Shares: If as an employee of the company, you have made a significant contribution, the company can reward you by issuing sweat equity shares. 

250. What are Voting and Non Voting Shares? 

Voting and Non-Voting Shares: Although the majority of shares carry voting rights, the company can make an exception and issue differential or zero voting rights to shareholders. 

251. What are Dividend Shares? 

Dividend Shares: A company can choose to pay dividends in the form of issuing new shares, on a pro-rata basis. 

252. What are Growth Shares? 

Growth Shares: These types of shares are associated with companies that have extraordinary growth rates. While such companies might not provide dividends, the value of their stocks increases rapidly, thereby providing capital gains to investors.

253. What are Value Shares? 

Value Shares: These types of shares are traded in stock markets at prices lower than their intrinsic value. Investors can expect the prices to appreciate over some time, thus providing them with a better share price. 

254. What are Preference Shares? 

Preferential shareholders receive preference in receiving profits of a company as compared to ordinary shareholders. Also, in the event of liquidation of a particular company, the preferential shareholders are paid off before ordinary shareholders. Here are the different types of shares in this category. 

255. What are Cumulative and Non-cumulative Shares? 

Cumulative and Non-Cumulative Preference Shares: In the case of cumulative preference shares, if a particular company doesn’t declare an annual dividend, the benefit is carried forward to the next financial year. Non-cumulative preference shares don't provide for receiving outstanding dividends benefits. 

256. What are Participating/Non-Participating Preference Shares? 

Participating preference shares allow shareholders to receive surplus profits, after payment of dividends by the company. This is over and above the receipt of dividends. Non-participating preference shares carry no such benefits, apart from the regular receipt of dividends. 

257. What are Convertible/Non-Convertible Preference Shares ? 

Convertible preference shares can be converted into equity shares, after meeting the requisite stipulations by the company’s Article of Association (AoA), while non-convertible preference shares carry no such benefits.

258. What are Redeemable/Irredeemable Preference Shares ? 

Redeemable/Irredeemable Preference Share: A company can repurchase or claim redeemable preference share at a fixed price and time. These types of shares are sans any maturity date. Irredeemable preference shares, on the other hand, have no such conditions. 

259. What are Class A Shares?

Class A shares are also called common shares as they are the first and foremost available shares within a company.  When compared to most other classes of shares that the company might hold, class A has the greatest number of voting rights among the company shareholders.  

260. What are Class B Shares ? 

Class B shares are more commonly known as preferred stock or preferred shares. This name comes from a lot more advantage of class B shares even if the purchase amount might be lower. Class B share comes with a very small voting power given to its shareholders. Sometimes the votes might be as low as one voter per shareholder for each of the shares they hold. 

261. What is HTM in investments? 

HTM investment, or Held-to-Maturity investment, refers to the purchase of debt securities, such as bonds, with the clear intent to hold them until their specified maturity date, rather than selling them before then to profit from market price fluctuations. Investments under HTM category shall not exceed 25 per cent of the bank’s total investments. 

262. What is HFT in Investment? 

HFT stands for High-Frequency Trading in the context of financial markets, which refers to a specialized type of algorithmic trading that uses powerful computers and complex algorithms to execute a large volume of orders at extremely high speeds, aiming to profit from tiny price differences and market inefficiencies. 

263. What is HFT in Share Market? 

HFT mean Held-For-Trading in accounting and finance, which describes securities bought with the intent to sell them within a short period, typically less than a year, to generate profit from price appreciation. 

264. Up to what period HFT Shares can be held? 

The securities acquired with the intention to trade by taking advantage of the short term price/interest rate movements shall be classified under ‘Held for Trading (HFT)’. The investments classified under HFT shall be sold within 90 days.                

265. What is AFS? 

AFS shares refer to Available For Sale (AFS) securities, which are financial assets not held for short-term trading or held to maturity but rather for potential future sale.

266. What are Derivatives? 

Derivatives are financial contracts that derive their value from an underlying asset such as stocks, commodities, currencies etc., and are set between two or more parties.

267. What are the important function of Financial Derivatives? 

Financial derivatives have two important functions. They are – Hedging and Speculation. 

268. Name types of Financial derivatives? 

There are four types of financial derivatives - 1. Options ;  2. Futures ;   3. Forwards  ;   4. Swaps.

269. What is meant by Option in the context of Financial Derivatives? 

Options are financial derivatives that give buyers the right, but not the obligation, to buy or sell an underlying asset at an agreed-upon price and date. 

270. What are Call Options? 

Call options allow the holder to buy the asset at a stated price within a specific time frame. 

271. What are Put Options? 

Put options, on the other hand, allow the holder to sell the asset at a stated price within a specific time frame. 

272. What is An American Option? 

American options can be exercised at any time between the date of purchase and the expiration date.  

273. What is an European Option? 

European options are different from American options in that they can only be exercised at the end of their lives on their expiration date. 

274. What are Futures in Share Market? 

Futures are contracts to buy or sell a specific underlying asset at a future date. The underlying asset can be a commodity, a security, or other financial instrument. 

275. What are Forward Contracts? 

A forward contract is a customized contract between two parties to buy or sell an asset at a specified price on a future date. 

276. What is the difference between Forward Contracts & Futures Contracts? 

While a forward contract does not trade on an exchange, a futures contract does. 

Settlement for the forward contract takes place at the end of the contract, while the futures contract settles on a daily basis. 

Most importantly, futures contracts exist as standardized contracts that are not customized between counterparties. 

277.  What is a Swap? 

A swap is a derivative contract through which two parties exchange the cash flows or liabilities from two different financial instruments. Usually, the principal does not change hands.

278. What is a Swaption? 

A Swaption, also known as a swap option, refers to an option to enter into an interest rate swap or some other type of swap. In exchange for an options premium, the buyer gains the right but not the obligation to enter into a specified swap agreement with the issuer on a specified future date. 

279. What is Impossible Trinity? 

The "Impossible Trinity" is referred to the balancing act of (1) inflation (price stability), (2) floating exchange rates (currency appreciation) and (3) capital inflows (capital mobility). Economic theory says, a country can only attain two of the three objectives and it is impossible to balance or control all the three parameters simultaneously, hence it is called as impossible trinity.

280. What is meant by Bail-out?

Providing money and / or resources (also known as a capital injection) to a failing company is known as Bailout. These actions help to prevent that Entity’s potential downfall which may include bankruptcy and default on its financial obligations. 

Sekhar Pariti

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