TOPIC: Miscellaneous
Directions (1-5): Rearrange the following sentences in the proper sequence to form a meaningful paragraph and then answer the questions given below.
(A)The Securities and Exchange Board of India (SEBI) introduced the framework in December — primarily triggered by the IL&FS fiasco — after it emerged
(B)In the form of downgrade of a debt or money market instrument to ‘below investment grade’ or subsequent downgrades from such levels
(C)Simply put, side pocketing is a framework that allows mutual funds to segregate the bad assets in a separate portfolio within their debt schemes
(D)The changes are based on recommendations made by the mutual fund advisory committee constituted by SEBI to limit liquid fund exposure to a single sector
(E)That many fund houses have huge exposure to the beleaguered entity and could potentially take a huge hit on their net asset value thereby affecting investor returns
(F)The capital markets regulator has laid down that such a portfolio can be created only if there is a credit event at the issuer level
(G)In other words, if a debt instrument is downgraded to default rating by credit rating agencies, then the fund house has the option to create a side pocket so that good assets can be ring-fenced
Q1. From the given options, which of the statement does not fit in the passage after rearrangement to make a coherent and meaningful paragraph?
(a) E
(b) B
(c) D
(d) C
(e) None of these.
Q2. From the given options, which of the following can fit the above passage after rearrangement to make a coherent and meaningful paragraph?
(a) Once the security falls below the investment grade, fund managers end up writing off papers as per their discretion.
(b) All existing investors in the scheme are allotted equal number of units in the segregated portfolio as held in the main portfolio and no redemption or subscription is allowed in the segregated portfolio.
(c) As a liquidity crisis engulfed India’s shadow banking industry following payment defaults by Infrastructure Leasing and Financial Services Ltd, mutual funds that had lent heavily to the non-bank lenders raced to cut their exposure.
(d) Industry experts said that a sizeable number of mutual funds have voluntarily adopted the changes that were introduced on Thursday.
(e) None of the above.
Q3. Which of the following would be the third sentence after rearrangement?
(a) E
(b) A
(c) F
(d) D
(e) None of these.
Q4. Among the following pairs which one of them is formed with two consecutive statements after the rearrangement?
(a) CA
(b) AD
(c) CD
(d) EG
(e) None of these.
Q5. Which of the following would be the penultimate sentence after rearrangement?
(a) E
(b) A
(c) F
(d) B
(e) None of these.
Directions (6-10): Read the following passage and answer the following questions based on the given passage.
In his inaugural address in January 2017, US President Trump said that “protection will lead to great prosperity and strength.” Thus he began his administration with a protectionist viewpoint, and he has stuck to it, especially in the past year. The result has been one of the biggest disruptions of the global trading system since the end of World War II. Meanwhile, Trump and the leaders of the other G20 countries assembled last week in Osaka, Japan to discuss global economic issues and attempt to resolve conflicts. Many of the conflicts revolve around US trade initiatives or threats. Such conflicts are exacerbated by the fact that, in many democratic countries, voters have tilted in a populist direction, rejecting parties that espouse traditional policies of open trade and economic integration. Before discussing the recent meeting, it is worth recalling the origins of the G20. This organization of the world’s 19 largest national economies and the European Union (EU) began in 1999 as a venue for finance ministers and central bankers to discuss global economic issues. In the wake of the global crisis in 2008, it was extended to become an annual get together of heads of government. The meetings in 2008 and 2009 were crucial in that they resulted in a joint commitment to avoid protectionist policies in the face of rising unemployment and populist sentiment. Finally, the meeting in 2009 entailed a joint commitment to use fiscal and monetary policies to stabilize the global economy. At the least, it probably helped to avoid a disintegration of the global system.
At the end of the summit, there was a statement endorsed by all of the leaders. Yet it was relatively vague and uncontroversial, offering support for free trade and innovation as drivers of economic growth, but failing to condemn protectionism for the first time since the G20 leaders started meeting in 2008. It appears to have been a heroic effort to paper over significant differences between the United States and the others. Still, the summit did have consequences. The United States and China agreed to a temporary truce in their ongoing trade war; that is, the United States will postpone imposition of another round of tariffs on Chinese imports, China will purchase more US agricultural products, and the two sides will continue to talk. Regardless, global businesses will likely be pleased not to face ruinous tariffs and immediate massive disruption to supply chains. This will likely continue to have a chilling effect on investment in global supply chains. All of this raises the question as to how this gets resolved. The current agreement also came about because of a meeting between the two presidents on the side lines of the G20 Summit in Osaka. The cycle will only be broken if one of two things happens. Either China accedes to US demands regarding structural economic issues (which seems unlikely), or the United States accepts a superficial deal and declares victory. The latter could happen if the United States were to worry that further trade tensions might undermine the economic recovery. Otherwise, we may be condemned to a repetition of events that suppresses investment and undermines economic expansion.
Another big issue at the G20 Summit was US relations with its traditional European and Japanese allies. The United States has imposed and/or threatened to impose significant tariffs on these countries. It has questioned the military and geopolitical alliances with these countries and has demanded greater reciprocity in terms of trade rules and military spending. Regarding Japan, Prime Minister Abe has worked very hard to solidify a relationship with US President Trump. However, the US president recently challenged Japan’s geopolitical role. Specifically, in anticipation of the G20 Summit in Osaka, Trump raised questions about the usefulness of the military pact between the United States and Japan, which was signed in 1950 during the Cold War and meant to protect Japan from attack by either the Soviet Union or China. The pact calls for the United States to defend Japan from attack. In exchange, the United States gets to station troops and equipment in Japan. Trump suggested that the pact is biased and does not require that Japan defend the United States.
Q6. Why have the conflicts over the global trade worsened in past few years?
(a) Borrowing costs remain low and asset values high.
(b) Amidst the trade wars, the global trend of merger and acquisition (M&A) activity has shifted significantly.
(c) The inflationary impact has been probably more than offset by a weakening of the British economy, thereby warranting an easing of monetary policy.
(d) Voters in most of the democratic countries have rejected the political parties supporting free trade and economic integration.
(e) None of these
Q7. What were the main issues discussed at the G20 summit held at Osaka, Japan?
(i) The ongoing trade war between US-China
(ii) Relationship between global leaders, US-Japan-Europe
(iii) greater multistakeholder collaboration to address political, economic and societal challenges
(a) Only (iii)
(b) Only (i)
(c) Both (i) & (ii)
(d) Both (ii) & (iii)
(e) All (i), (ii), (iii)
Q8. Which of the following has been set as the precondition by the writer for US to accept a superficial deal?
(a) China will purchase more agricultural products, and the two sides will continue to talk.
(b) Deal making within Europe and Japan should slow down.
(c) EU, Japan, and China actively push for trade liberalization projects
(d) EU nations will obtain easier access to the traditionally protectionist markets of South America.
(e) In case US accepts that the heightening trade tensions will subvert the expected economic recovery
Q9. What has been the contradiction mentioned by the writer regarding the result of latest G20 summit?
(a) Trump had mused about the United States withdrawal from the military pact with other countries but wanted to establish itself as umbrella nation for emerging economies.
(b) The G20 summit supported free trade for global economic growth but didn’t condemn protectionism.
(c) As the United States has moved in a protectionist direction, there have lately been increased efforts on the part of other major economies to boost economic integration without the United States.
(d) While the world continues to wait for a possible trade agreement between the United States and China, many global companies are not waiting and have chosen to begin making changes to their supply chains.
(e) None of these
Q10. Why were the G20 meeting held during 2008 and 2009 important for the global economy?
(a)The member nations had jointly approved working on a free trade agreements.
(b) Members states had convinced US to adopt an expansionary trade policy.
(c) Many emerging economies were fragile and the 2008 and 2009 meeting helped the overcome their excessive debt.
(d) Owing to the increasing global unemployment and populist sentiments, the members took a joint commitment against protectionism.
(e) None of these
Solutions
S1. Ans. (c)
Sol. Reading through the given sentences it can be clearly seen that (E) and (G) cannot be the first sentence in arrangement because of the use of conjunction From sentence (A) we can infer that SEBI introduced a framework. But the name of the framework is not given. And sentence (C) tells us the name of the framework i.e. Side Pocketing. The sentence (E) tells us why the framework was put forward. So after (A), (E) should come. The sentence (F) explains that the portfolio can be created only if there is a credit event at the issuer level. (B) Further follows (F). Sentence (G) is the final sentence for the given information. (B) provides the information about when the side pocket can be created. The sentence (D) is not going according to the theme of the formed passage. Hence, the correct arrangement is CAEFBG. So, the correct option is (c).
S2. Ans. (b)
Sol. The option (a) is nowhere linked to the given passage. It tells about the fund managers which is not in connection with the given passage. Option (c) is about the liquidity crisis. Option (d) is discussing the increase in the number of mutual funds. Only option (b) discusses about the scheme. So, option (b) is correct answer choice.
S3. Ans. (a)
Sol. Reading through the given sentences it can be clearly seen that (E) and (G) cannot be the first sentence in arrangement because of the use of conjunction From sentence (A) we can infer that SEBI introduced a framework. But the name of the framework is not given. And sentence (C) tells us the name of the framework i.e. Side Pocketing. The sentence (E) tells us why the framework was put forward. So after (A), (E) should come. The sentence (F) explains that the portfolio can be created only if there is a credit event at the issuer level. (B) further follows (B). Sentence (G) is the final sentence for the given information. (B) provides the information about when the side pocket can be created. The sentence (D) is not going according to the theme of the formed passage. Hence, the correct arrangement is CAEFBG. So, the correct option is (a).
S4. Ans. (a)
Sol. Reading through the given sentences it can be clearly seen that (E) and (G) cannot be the first sentence in arrangement because of the use of conjunction From sentence (A) we can infer that SEBI introduced a framework. But the name of the framework is not given. And sentence (C) tells us the name of the framework i.e. Side Pocketing. The sentence (E) tells us why the framework was put forward. So after (A), (E) should come. The sentence (F) explains that the portfolio can be created only if there is a credit event at the issuer level. (B) further follows (B). Sentence (G) is the final sentence for the given information. (B) provides the information about when the side pocket can be created. The sentence (D) is not going according to the theme of the formed passage. Hence, the correct arrangement is CAEFBG. So, the correct option is (a).
S5. Ans. (d)
Sol. Reading through the given sentences it can be clearly seen that (E) and (G) cannot be the first sentence in arrangement because of the use of conjunction From sentence (A) we can infer that SEBI introduced a framework. But the name of the framework is not given. And sentence (C) tells us the name of the framework i.e. Side Pocketing. The sentence (E) tells us why the framework was put forward. So after (A), (E) should come. The sentence (F) explains that the portfolio can be created only if there is a credit event at the issuer level. (B) further follows (B). Sentence (G) is the final sentence for the given information. (B) provides the information about when the side pocket can be created. The sentence (D) is not going according to the theme of the formed passage. Hence, the correct arrangement is CAEFBG. So, the correct option is (d).
S6. Ans. (d)
Sol. To validate the answer, refer to the first paragraph of the given passage, which mention, “Such conflicts are exacerbated by the fact that, in many democratic countries, voters have tilted in a populist direction, rejecting parties that espouse traditional policies of open trade and economic integration.” Here, statement (d) clearly justifies the quoted text. Hence, option (d) is the most suitable answer choice.
S7. Ans. (c)
Sol. Here, to validate the answer refer to the second and third paragraph of the given passage, which mentions, “The United States and China agreed to a temporary truce in their ongoing trade war….” and “Another big issue at the G20 Summit was US relations with its traditional European and Japanese allies.” Here, both the quoted statements have been justified in statements (i), (ii), (iii). Hence, option (c) is the most suitable answer choice.
S8. Ans. (e)
Sol. To validate the answer, refer to the last few lines of the second paragraph of the given passage, which mentions, “Either China accedes to US demands regarding structural economic issues (which seems unlikely), or the United States accepts a superficial deal and declares victory. The latter could happen if the United States were to worry that further trade tensions might undermine the economic recovery.” Here, the statement given in option (e) clearly justifies the quoted text. Hence, option (e) is the most suitable answer choice.
S9. Ans. (b)
Sol. To validate the answer, refer to the first few lines of the second paragraph of the passage given above, which mention, “Yet it was relatively vague and uncontroversial, offering support for free trade and innovation as drivers of economic growth, but failing to condemn protectionism for the first time since the G20 leaders started meeting in 2008.” Here, we can infer the quoted text from the statement given in option (b). Hence, option (b) is the most suitable answer choice.
S10. Ans. (d)
Sol. To validate the answer, refer to the first paragraph of the given passage, which mentions, “The meetings in 2008 and 2009 were crucial in that they resulted in a joint commitment to avoid protectionist policies in the face of rising unemployment and populist sentiment. Finally, the meeting in 2009 entailed a joint commitment to use fiscal and monetary policies to stabilize the global economy.” Here, we can infer the quoted text from the statement given in option (d). Hence, option (d) is the most suitable answer choice.
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