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					FUNDAMENTALS OF INFRASTRUCTURE PROJECT FINANCING MB0016


1. The role of private financing is -               7. Risk profile of the infrastructure projects
a) To ease the burden on Government Finances        includes three procedural stages. Choose the wrong
b) Encourage better risk sharing and                one –
   accountability                                   a) Development risk
c) Monitoring and management of infrastructure      b) Construction risk
   facilities                                       c) Operating risk
d) All of the above           Ans. d                d) Financial risk                    Ans. d

2. The use of ______ is called project              8. Inadequate clarity in government policies is
   Financing                                            called as _____
a) Recourse Financing                               a) Demand risk
b) Non-recourse financing           Ans. b          b) Financial risk
                                                    c) Market risk
3. Differences in project, country and sectoral     d) Political risk                    Ans. d
   Characteristics influence
a) The availability of finance                      9. What is forward cover?
b) The instruments of risk allocation               a) Risk to cover all losses
c) The degree and nature of government              b) Protection at which a currency is bought or
   involvement                                         sold at some future time      Ans. b
d) All of the above           Ans. d
                                                    10. ―Take or Pay‖ contract is kind of
4. As the project size increases, the               a) Country risk
   Complexity of risk allocation ____rapidly        b) Sector risk
a) Increases                                        c) Currency risk
b) Decreases                                        d) Commercial risk                    Ans. b
c) Remains same               Ans. a
                                                    11. The guarantees for project financing under
5. In industrialized countries infrastructure           The ―ECO‖ is provided by ______
   Banks have performed better due to –             a) IDBI
a) Stronger tradition of autonomy                   b) ICICI
b) Solid appraisal capabilities                     c) World Bank
c) Both a & b                 Ans. c                d) SBI                                Ans. c

6. IL & FS and Housing and Urban                    12. Mitigating major project risks starts with –
   Development corporation aim to sell their        a) Identifying projects risks
   loans to other private financial institutions    b) Appraising the project
   after ______                                     c) Consideration of all categories of risk
a) Establishing Project credit histories
b) Money is available                                                                             Ans. a
c) They went into financial difficulties            13. Which of the following is the term of off-
                                                        take agreement?
                                           Ans. A   a) Power purchase agreement
                                                    b) Call and put options
                                                    c) Forward sales and purchase contracts
                                                                                  Ans. a



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FUNDAMENTALS OF INFRASTRUCTURE PROJECT FINANCING MB0016

                                                      c) It should be maintained annually
14. The institutional options represent different –                                                 Ans.b
a) Ownership,        financing     &      operation
    responsibilities                                  21. Transparency and consistency in private
b) Risk between government & private sector           sponsor selection process is important factor in
c) Both a & b                  Ans. c                 credit enhancement
                                                      a) True
15. BOT projects are public infrastructure            b) False
projects, which employ a particular from a                                                      Ans. a
structure financing
a) True                                               22. Bank letter of credit is needed to cover ____
b) False                 Ans. a                       a) Credibility of sponsor
                                                      b) Shortfalls in revenues
16. The concessionaire approach has been              c) Losses                       Ans. b
adopted recently by developing countries for
private sector funds for infrastructure               23. The efficiency of commercilization would also
development                                           be contingent upon the ability to
a) True                                               a) Segregate payers and non-payers
b) False                  Ans. a                      b) Prevent any incidence of free riding
                                                      c) Both a & b                 Ans. c
17. What is concession period?
a) Time period given to own, operate and              24. The key problem in commercialization of
    maintain infrastructure                           infrastructure projects is the appropriate allocation
b) Time to provide subsidies                          of risk
c) Time period for paying penalties                   a) True
                                    Ans. a            b) False                       Ans. a

18. What is Primary Party?                            25. ______ Mechanism may be needed to improve
a) A party for enjoying                               the overall credit quality of the project and thence
b) A government agency           for   maintaining    to gain confidence of lenders/investors
    infrastructure                                    a) Credit risk taking
c) A invitations for bids                             b) Credibility
                                            Ans. b    c) Credit enhancement                  Ans. c

19. The sponsor is the party, usually a               26. What is an escrow account?
consortium of interested groups                       a) An account maintained to keep foreign reserves
a) True                                               b) An arrangement in which all inflows from the
b) False                                                  concerned project are pooled into a separate
                                  Ans. a                  bank account
                                                      c) A current account               Ans. b
20. The basic premise for private sector
participation in infrastructure development is that   27. The ―marketability‖ of infrastructure activities
______                                                is determined by the following characteristic _____
a) They should run it efficiently                     a) Production technology that leads to natural
b) They should have the capability to                     monopoly
    commercialize these projects                      b) Public nature of consumption



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FUNDAMENTALS OF INFRASTRUCTURE PROJECT FINANCING MB0016

c) Constraints on cost recovery                    a) 2
d) All of the above          Ans. d                b) 3
                                                   c) 4                 Ans. a
28. External assistance programs can enhance
countries institutional capacity                   34. Rakesh Mohan‘s committee provides tax relied
a) By making relevant knowledge                    under ______ provision
b) By supplementing policy advice with well-       a) 81D
    designed programs of technical cooperation     b) 80CC
    and training                                   c) 80C               Ans. b
c) By providing financial assistance for
    investment and reforms                         35. EPD, which is currently managed by SBI could
d) All of the above            Ans. d              be spilt up and managed by professional asset
                                                   management companies on a competitive basis
29. Commercial banks have traditionally funded     a) True
the working capital requirements of medium and     b) False              Ans. a
large industrial projects
a) True
b) False                     Ans. a

30. Which of the following features are true in
context of infrastructure projects?
a) High capital cost and sunk cost
b) Long gestation
c) Have no contestability
d) All are true                Ans. d

31. Infrastructure forms typically fund projects
through –
a) Debt finance
b) Equity
c) Bond
d) Both a & b                  Ans. a

32. ECB‘s are borrowing in form of ____ from
offshore countries
a) Debentures
b) Equities
c) Syndicated loans
d) Loans from RBI            Ans. c

33. IFDC – a specialized intermediary has ____
divisions


              INFRSTRUCTURE PROJECT FINANCING



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FUNDAMENTALS OF INFRASTRUCTURE PROJECT FINANCING MB0016



UNIT-1                                          d) None                      Ans. a

1. In which sector the scope for private        7. Infrastructure investment by the
   financing in great _____                     international Finance Corporation (IFC), a
a) Power                                        ____ affiliate that invest only in private
b) Telecommunication                            entities
c) Transport                                    a) IMF
d) Both a & b                                   b) World Bank
e) None                     Ans. d              c) UNESCO
                                                d) UND
2. Which among the following is the                                                 ANS. b
predominant sources of infrastructure finance
___                                             8. Private Finance proportionately greater in
a) Tax revenues                                    ______
b) Govt. borrowings                             a) Germany
c) Both a & b                                   b) Latin American
d) None                      Ans. c             c) America
                                                d) U.K.                     Ans. b
3. _____ Now spend around ___ a year in
infrastructure investment                       9. ―Public private partnership‖, represents a
a) Undeveloped countries, $ 500bn                  return to the ______
b) Developing countries, $ 200 bn               a) 17th Century
c) Developed countries, $ 50 bn                 b) 18th Century
d) None                                         c) 19th Century
                                                d) 21st Century              Ans. c
4. In developing countries, infrastructure
investment is nearly derived from _____ and     10. Which among the following countries
almost _____ of Govt. borrowings/tax            stood out largest-number of limited-recourse
revenues                                        projects-
a) Govt. borrowings, 50%                        a) Mexico
b) Tax revenues, 90%                            b) Brazil
c) Both a & b                                   c) India
d) None                      Ans. b             d) Malaysia                 Ans. a

5. External borrowings often reflects _____     11. ―Toll-road‖ financing requires ________
a) Macro economic constraints                   than do other infrastructure projects
b) Micro economic constraints                   a) Lower government involvement
c) Both a & b                                   b) Greater government involvement
d) None                       Ans. a            c) No involvement
                                                d) Can‘t say                   Ans. b
6. Infrastructure investment in developing
countries represents, on average, _____         12. Which among the following factors affect
a) 4% of GDP                                    the availability of projects finance _____
b) 10% of GNP                                   a) Project size
c) 25% of NNP                                   b) Risk in projects


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FUNDAMENTALS OF INFRASTRUCTURE PROJECT FINANCING MB0016

c) Credibility of contracts                       c) Indonesia
d) All                                            d) U.K                         Ans. c
e) Both a & b         Ans. d
                                                  18. ―Revenue bond‖ means ______
13. The average size of projects in low-          a) Used for green feed projects & paid back
income countries has been _____                       from the project‘s revenues
a) $ 460 m                                        b) Used for white green projects
b) $ 450 m                                        c) Both a & b
c) $ 440 m                                        d) None                       Ans. a
d) $ 640 m                  Ans. c
                                                  19. In Industrial countries, bond financing is
Note: In middle-income countries, av. Size is     widely used to raise funds for ___
more than 25% (i.e. $ 640 m); hereby              a) Municipal infrastructure
transaction costs are low.                        b) Tele communication infrastructure
                                                  c) Power infrastructure
14. The first private power project i.e. ―Hub     d) None                        Ans. a
river project‖ if completed will be the world‘s
largest power facilities, belong to which         20. One of the best e.g. of contractual savings
country-                                          institutions are –
a) India                                          a) Pension funds
b) America                                        b) Insurance co.
c) Japan                                          c) Both a & b
d) Pakistan                                       d) None
e) Sri Lanka                  Ans. c                                                       Ans. c
                                                  21. ____ has used its permission fund system
15. ―Shadaw tolls,‖ the concept proposed in       to promote the privatization of public utilities
_____                                             -
a) Australia & U.K                                a) Chile
b) USA & U.K.                                     b) Turkey
c) U.K. & France                                  c) Norway
d) Germany & France            Ans. a             d) Rome
Note: ―Shadaw-toll‖ ___ tolls paid form govt.                                              Ans. a
revenues on the basis of traffic flows.
                                                  22. ―Non-recourse finance‖ in______
16. ―BANOBRAS‖ in working to strong then          a) Govt. does not funds the projects
    municipal finances belongs to –               b) When lenders are repaid only from the
a) Brazil                                             cost flow generated by the project
b) Malaysia                                       c) In the event of complete failure Govt.
c) Mexico                                             repay lenders
d) Argentina                Ans. c                d) None                       Ans. b

17. The Regional Development Account              23. ―Limited resource financing in _______
(RDA) in ____ is a transitional credit system,    a) Lenders can attach the assets of a parent
which lends at near mkt. rates                        co. sponsoring a project
a) Malaysia                                       b) In the event of failure assets if the co. can
b) Mexico                                             be sold for repayment of debt



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FUNDAMENTALS OF INFRASTRUCTURE PROJECT FINANCING MB0016

c) Govt., will fund the project                  29. In _____ projects, the Mkt. Risk is
d) All                                               typically borne by the sponsor
Ans. a                                           a) Power projects
                                                 b) Tele communication projects
24. The problem of infrastructure project        c) Road project
finance is due to _____                          d) None                       Ans. b
a) Cost overrun
b) Time overrun                                  30. Power purchases agreement reduces ____
c) Failure to comply covenants of loan           a) Market risk
d) All of the above         Ans. d               b) Construction risk
                                                 c) Development risk
                 UNIT-II                         d) Political risk                 Ans. a

25. Which among the following risk, Govt.        31. ―Take or pay‖ contract relates to _____
announce explicitly of by default _____          a) Telecom sector
a) Financial risk                                b) Power sector
b) Market risk                                   c) Transport sector
c) Construction risk                             d) All                       Ans. b
d) Development risk           Ans. b
                                                 32. Environment risk relates to ____
26. Which of the following risk is also known    a) Pollution
as commercial risk _____                         b) Legal compliance
a) Financial risk                                c) Compensation claim
b) Market risk                                   d) All                        Ans. d
c) Construction risk
d) Development risk          Ans. b              33. ______ is a computer-based risk mgt.
                                                     Approach to infrastructure project
27. How many types of risk are basically             finance transaction chart involves the
prevalent ______                                     private sector.
a) Currency                                      a) ORF RISK
b) Commercial                                    b) INF RISK
c) Policy-induced                                c) IOF RISK
d) Country                                       d) None                    Ans. b
e) All                   Ans e
                                                 34. Appraising the project includes –
28. Which among the following risk satisfy       a) Technical & environmental facilities
the following statements ____                    b) Financial & economic viability
1. Those relating to cost of production &        c) Both a & b
2. Those arising from uncertainties in           d) None                       Ans. c
    demand for services
    a) Financial risk                            35. Which among the following risk
    b) Currency risk                                 associated with the following statement
    c) Commercial or Mkt. Risk                       ____
    d) Country risk                              1) Developing & Constructing the project
                                        Ans. c   2) Operating & maintaining be assets
                                                 3) Finding a Mkt. or the output



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FUNDAMENTALS OF INFRASTRUCTURE PROJECT FINANCING MB0016

   a)   Commercial risk                           41. ______ is defined as the project‘s ability
   b)   Construction risk                         to produce below a certain unit cost for a
   c)   Market risk                               specified period of time, such as six months.
   d)   None                                      a) Financial Completion
                                        Ans. a    b) Project completion
                                                  c) Commercial completion
36. Most project consists of the which of the     d) Market completion                  Ans. A
     following phases _____
a) Development — start up —operation              42. The most common threat to physical
b) Development       —     construction    —      completion is ______
    operation                                     a) Cost reduction
c) Both a & b                                     b) Cost apportionment‘
d) None                       Ans.c               c) Cost allocation
                                                  d) Cost overruns              Ans. d
37. In _____ risk is usually very high and
    only equity capital from the main             43. One way to mitigate ______ is to go for
    sponsors in generically used.                 off-take agreement
a) Development phase                              a) Construction risk
b) Construction phase                             b) Market risk
c) Operation phase                                c) Financial risk
d) None                       Ans. a              d) Development risk                  Ans. b
                                                  Note: An off-take agreement obliges the off-
38. Project co. hedge construction risk           taker (often a sponsor) to purchase all or part
    primarily by using _____                      of the projects output.
a) Fixed price
b) Including turnkey contracts                    44. Which of the following in instruments are
c) Built in provisions for liquidated damages     used to mitigate market risk _______
d) All                                            a) Power purchase agreement (PPA)
e) Both b & c                  Ans. d             b) Call & put options
                                                  c) Forward sales & purchase contracts
39. Typically _______ & _______ are               d) All
    interested in both the physical & financial   e) Both a & b                        Ans. d
    aspects of project completion
a) Debtors & Investor                             45. PPA is a form of off-take agreement
b) Sponsor, Debtors & creditors                   commonly used in _______ projects in
c) Creditors & investors                          emerging markets.
d) None                       Ans. c              a) Tele communication projects
                                                  b) Transport projects
40. _______ is defined as the projects ability    c) Power projects
to sustain production at a certain capacity for   d) All                         Ans. c
a one quarter of the operating year
a) Financial completion                           46. A ______ gives a project co. the option to
b) Project completion                             sell its output at a fixed price at some point in
c) Commercial completion                          the future.
d) Market completion                  Ans. b      a) Call option
                                                  b) Put option



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FUNDAMENTALS OF INFRASTRUCTURE PROJECT FINANCING MB0016

c) Call in amears                              d) All
d) None                     Ans. b             e) Both a & c                       Ans. d

47. A _____would allow the projects co. to     53. Economic risk consists of ______
buy its input at a fixed price in the future   a) Currency risk
a) Call Option                                 b) Interest rate risks
b) Put Option                                  c) FDI, dear money
c) Call in arrears                             d) Dear money & cheap money
d) None                          Ans. A        e) Only a & b                       Ans. e

48. Product option in the market usually do    54. The other name for ―Sovereign risk‖
not go beyond _______ in maturity              are_____
a) Two year                                    a) Interest rate risk
b) Five year                                   b) Exchange rate risk
c) Ten year                                    c) Currency risk
d) None                    Ans. a              d) All
                                               e) None                        Ans. b
49. Option may not be feasible for longer-
term hedging in many projects.                 55. ―Force majeure risk‖, _______
a) True                                        a) Default by citizens (senior)
b) False                                       b) Default by Investors
c) Data incorrect                              c) Default by parties (suppliers)
d) None                     Ans. a             d) Default by debtors
                                               Ans. c
50. Forward sales & purchase contracts
provide another means of hedging _____risk     56. Project –finance is supposed non-recourse
a) Product price                               to the ______
b) Product place                               a) Creditors
c) Product promotion                           b) Investors
d) Product mix              Ans. a             c) Sponsor
                                               d) All                              Ans. c
51. Currency risk can be mitigated by _____
a) Mixing local currency & foreign currency    57. The risk of force majeure events if
    loan                                       unallocated from the project, will limit most
b) Swapping commences                          projects to the ________
c) Obtaining Govt. Guarantee of foreign        a) AAA category
    exchange availability                      b) BBB category
d) All                                         c) A+++ category
e) Both a & b                 Ans. d           d) RRR category                      Ans. b

52. Interest rate risk can be mitigated by     58. A project can nitrate force majeune risk
________                                       with _______
a) Negotiated fixed interest rates             a) Business interruption
b) Conversion of interest rates-fixed to       b) Property casualty insurance
   flracting & nice-versa                      c) Both a& c
c) Swapping of interest rates                  d) None                      Ans. C



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FUNDAMENTALS OF INFRASTRUCTURE PROJECT FINANCING MB0016

                                               64. Which of the examples comes under
Unit III                                       commercial agreement ______
                                               a) Project completion guarantees
59. Match the following _______                b) Lending agreement
A) Primary objective of analyzing project      c) Depository agreement
    contract = (i) to determine the level of   d) Targeted Insurance policies
    protection from market & operating         e) None                      Ans. e
    conditions each agreement provides.
B) Secondary objective = (ii) to determine     Note: - In this question all e.g. belongs to
    whether the obligation created by each     collateral agreements.
    contract address the project operating &
    match correctly with other project         65. Typically which of the following sectors
    contacts.                                  has been well understood by FI‘s & Investors
a) (A)-i, (B) -ii                              in the capital mkt.______
b) (A)-ii, (B)-i                               a) Power
c) (A)-i, ii                                   b) Telecom
d) None                      Ans. a            c) Surface transport
                                               d) Water supply
60. Contract analysis consists of ______       e) Both a& b                Ans.e
a) Commercial agreements
b) Collateral agreements                       66. Typically projects in the targeted sectors
c) Informal agreements                         have pay back periods varying from_____
d) Both a& b                   Ans. d          a) 5 to 10 yr.
                                               b) 25 to 30 yr.
61. The best example under commercial          c) 15 to 20 yr.
project agreements are ______                  d) None                       Ans. c
a) Power purchase agreements
b) Boot (Build –own- operate –transfer)        67. The ____ affects the cost of product or
    contracts                                  service
c) Concession agreement                        a) Direct taxation
d) Airport lending fee agreements              b) Indirect taxation
e) All                       Ans. e            c) Both a& b
                                               d) None                    Ans. b
62. Power purchase agreement are______
  a) Legal agreements                          68. The _______ effects the margin of income
  b) Commercial agreement                      / profit.
  c) Collateral agreement                      a) Direct taxation
  d) Informal agreements Ans. b                b) Indirect taxation
63. The best example under collateral          c) Both a& b
agreements comes______                         d) None                      Ans. a
a) Equity contribution agreement
b) Indenture                                   69. In India infrastructure entities are taxed
c) LOC                                         ____
d) All                                         a) 100% for first 10yr.
e) None                     Ans. d             b) 0% for first 15 yr.
                                               c) 0% for first 10yr.



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FUNDAMENTALS OF INFRASTRUCTURE PROJECT FINANCING MB0016

d) 200% for 15 yr.                   Ans. c       d) None                      Ans. a

70. Section ______ defined tax holiday on         Unit IV
profits desired from infrastructure business
a) Sec. 80-1A                                     76. Under Institutions options match the
b) Sec.80-1B                                      following ___
c) Sec.80- 1C                                     (1) Options A :(i) public ownership & public
d) None                        Ans. a                 operation
                                                  (2) options B :(ii) public ownership &
71. Project eligible for benefits under ______        private operation
could be defined as those where the financing     (3) options C :(iii) private ownership &
is fully under written in a credible manner or        private operation
where the central or state govt. is a partner     (4) options D       :(iv) community & user
with a min equity state of 10%.                       provision
a) Sec.35 BA                                      a) 1-iv, 2-iii, 3-i, 4-ii
b) Sec.35 CA                                      b) 1-iii, 2ii, 3-iv, 4-i
c) Sec.35 Ac                                      c) 1-i, 2-ii, 3-iv, 4-iii
d) None                        Ans. b             d) 1-i, 2-iii, 3-ii, 4-iv
                                                  e) None                                Ans. e
72. ______ which exempts tax on interest          Note: correct answer =1-i, 2-ii, 3-iii, 4-iv.
dividend & capital gain received by
infrastructure capital fund or infrastructure     77. Under Infrastructure , which sequences
capital co.                                       correct?_____
a) Sec.10 (23cs)                                  1 Indicators of supply ---(i) Infrastructure
b) Sec.10 (25F)                                   coverage & performance
c) Sec.10 (23E)                                   2 Demand          ------(ii) Economic goowth
d) Sec.10 (23D)              Ans. a               and demographic shifts
                                                  a) 1-ii, 2-i
73. The state level FI‘, Cater specially to the   b) 1-i, ii
medium & long term financing needs of             c) 1-i, 2-ii
a) Small size units only                          d) None                             Ans. c
b) Medium size units only
c) Big size units only                            78. Under Infrastructure, ―what is needed,‖
d) Small & Medium size units only                 follows a correct sequence of ______
                       Ans. d                     1. Low-income countries --- (i) low
74. The three major FI‘, are_____                     coverage & poor performance
a) IDBI, UTI, LIC                                 2. Socialist economies -----(ii) high coverage
b) IDBI, ICICI, IFCI                                  & relatively good technical performance
c) ICICI, UTI, IFCI                               3. Middle- income economies ---(iii) high
d) LIC, UTI, RBI              Ans. b                  coverage but weaker performance
                                                  4. High-growth economics ----(iv) good
75. The suction 80 L of the Income Tax Act            coverage & performance
deals with_____
a) Individuals only (i.e. HUF)                    a) 1-i, 2-iii, 3-ii, 4-iv
b) Individuals & Agriculture                      b) 1-i, 2-ii,  3-iv, 4-iv
c) Other than Individuals & agriculture           c) 1-i, 2—iii, 3- iv, 4-ii



                                                                                  Page 10 of 18
FUNDAMENTALS OF INFRASTRUCTURE PROJECT FINANCING MB0016

d) None                        Ans. b              d) Middle-income counties            Ans. d

79. Under socialist economics, the main            84. To minimize risks to public welfare in the
    challenge here is to ______ to meet one            case of concessions & privatization,
    changing pattern of demand brought                 public security & transparency are
    about by economic restructuring.                   important to avoid the granting of ―
a) re-orient supply                                    _____‖ deals that can quickly sour the
b) re-orient demand                                    taste for private involvement.
c) re-orient both demand & supply                  a) Sweetheart
d) None                     Ans. a                 b) Sweet equity shares
                                                   c) Store option
80. ―Improving efficiency‖ in their highest        d) None                       Ans. a
    priority comes under _____
a) Socialist economics                             85. _______ Has used foreign expertise in
b) Middle-income economics                             developing its irrigation, railway &
c) High-income economics (growth)                      airline Capabilities
d) Low –income economics                           a) Newzeland
                                     Ans. b        b) Australia
                                                   c) Mauritius
81. ― For them the challenge is to meet            d) Thailand                       Ans. a
    rapidly      expanding        needs      for
    infrastructure of all types to sustain needs   86. Road maintenance is now done privately
    for infrastructure of all types to sustain         in large no. of _____
    their average annual growth in out put &       a) South –east Asian
    to service the need of urban population        b) African countries
    growing‖      This      statement     comes    c) Canada
    under______                                    d) None                    Ans. b
a) Socialist economics
b) Middle-income economics                         87. Under this phase the bank will obtain
c) High-income economics (growth)                      letters of comfort (not a guarantee) from
d) Low –income economics               Ans. c          the parent co. in favour of the bank.
                                                   a) Constructive phase
82. All the three dimension under                  b) Start up phase
    infrastructure_____ i.e. capacity –            c) Operational stage
    Technicality & capability are typically        d) None                        Ans. b
    low under ___
a) Low-income counties                             88. Which of the following phase is a case of
b) High-income counties                                limited recourse financing
c) High-growth counties                            a) Constructive phase
d) Middle-income counties         Ans. a           b) Start up phase
                                                   c) Operational stage
83. Technical & managerial capabilities are        d) None                       Ans. b
    generally high under
a) Low-income counties                             89. Which of the following phase is a case of
b) High-income counties                                full recourse___
c) High-growth counties                            a) Constructive phase



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b) Start up phase
c) Operational stage                          96. _______ Projects are being envisaged for
d) None                    Ans. a             the surface transport sector ______
                                              a) BOT
90. The ―deep discount bond‖ is used for      b) BOO
     _____                                    c) BOOT
a) Financing long payback period projects     d) None                             Ans. a
b) Financing short payback period projects
c) Financing medium payback period            97. ______ rarely involve directs transfer of
    projects                                  public assets from the Govt. to the private
d) None                     Ans. a            sporter
                                              a) BOT
91. ―The case of Sardar Sarovar Nigam         b) BOO
    Ltd.‖, comes under or supported by ____   c) BOOT
a) Zero coupon bonds                          d) None                             Ans. a
b) Deep discount bonds
c) Both a & b                                 98. The concessionaire approach _____
d) None                      Ans. b           a) BOO, BOT, & BOLT
                                              b) BOO, BOOT & BOLT
92. Level of private sector involvement       c) BOOT & BOLT only
    __________                                d) None                            Ans. a
a) Decreases from left to right
b) Increase from left to right                99. In a _______ agreement, the private
c) No movement                                sector design & builds the infrastructure,
d) None                        Ans. a         finances its construction & owns, operates &
                                              maintain it over a period, often as long as 20
93. Under BOT (Build operate Transfer),       or 30 years. This period in sometimes referred
    ownership of assets belongs to            to as the ______
A) Private                                    a) BOO, gestation
b) Govt.                                      b) BOT, concession period
c) Semi-Govt.                                 c) BOLT, concession period
d) None                      Ans. b           d) None                               Ans. b

94. BOO (Build own arrangement) is            100. Project financing is often reformed to as
favoured for ______                           _____
a) Tele communications                        a) Unlimited resource financing
b) Power projects                             b) Limited resource financing
c) Surface Transport                          c) Unlimited resource but with guarantee
d) None                Ans. b                 d) None                               Ans. b

95. The most prominent & possibly the most    101. Infrastructure bonds are not availability
widely used is the _______                    to _______ projects but are available to land
a) BOT                                        transport sector & electricity generation.
b) BOO                                        a) Water project
c) BOOT                                       b) Health projects
d) None                           Ans. a      c) Both a & b



                                                                              Page 12 of 18
FUNDAMENTALS OF INFRASTRUCTURE PROJECT FINANCING MB0016

d) None                        Ans. c             106. Force majeune events typically include
                                                  those events which are______
102. It is the agreement between the Govt.        a) Outside the control of the parties
agency and sponsor under which one ____           b) Within the control of the parties
agrees to purchase one output of the              c) Partial control of the parties
infrastructure. This agreement is known as        d) None                        Ans. a
a) Govt. agency, off-take agreement               Note: Ex. Of Force majeune event is-war,
b) Sponsor off-take agreement                     earthquake flood, fire, storm, tempest etc.
c) Third parties off-take agreements
d) None                       Ans. a              107. Default under which agreement will be
                                                  total to the project ______
103. Under infrastructure mgt., match the         a) Off-take agreement
following _____                                   b) Operating & maintenance
(1) Extension of time (i) form by Govt.           c) Fuel supply agreement
(2) Delay cost         (ii) form by constructor   d) All                      Ans. a
a) (1)—ii,     (2)—I
b) (1) – I     (2)- ii                            108. If a default is not rectified within the
c) none                Ans. b                     agreed cure period, the govt. agency may
                                                  require a novel remedy known as ―-------------
104.The construction contractor has potential     -―
liabilities for ____                              a) Step out
a) Damages to the sponsor for under               b) Step in
    performance of the project                    c) Set up cost
b) Damages to the sponsor for lateness in         d) None                      Ans. b
    delivering the projects
c) Damages to the sponsor in rectifying           109. The right to ―Step in‖ generally in
    defects                                       intended only to be a ______
d) All                        Ans. d              a) Long-term remedy
                                                  b) Short-term remedy
105. Match the Connect sequence _______           c) Medium-term remedy
a) Shareholders Agreement— (i) between            d) None                      Ans. b
   the investors
b) Site lease Agreement—(ii) between the          110. To perfect itself from _____, the govt.
   Govt. and the sponsor                          agency may require liquidated damages to be
c) Design Agreement—(iii) between the             paid in the event of default
   sponsor & the design consultants               a) Commercial loss
                                                  b) Financial loss
   (i) (1)—ii        (2)—iii          (3)—i       c) Construction loss
   (ii) (1)—i        (2)—iii          (3)—ii      d) All                       Ans. b
   (iii) (1)—iii     (2)—ii           (3)—i
   (iv) (1)—i        (2)—iii          (3)—ii      111. The govt. agency when excising its step
   (v) None                                       in right is not normally an________
Note: The correct answer is (1)—I,    (2)—ii,     a) Agent of the sponsor
        (3)—iii                                   b) Agent of the Finances
Ans. e                                            c) Agent of the operator
                                                  d) All                        Ans. a



                                                                                  Page 13 of 18
FUNDAMENTALS OF INFRASTRUCTURE PROJECT FINANCING MB0016

                                                b) Export credit agencies
UNIT-5                                          c) Credit rating agencies
                                                d) None                       Ans. b
112. The key problem in Commercialization
of infrastructure projects is the ________      118. A bank may provide a letter of credit
a) Anticipating risk                            (LC) to be drawn upon when needed to cover
b) Acquiring risk                               a) Shortfall in sales
c) Allocating risk                              b) Shortfall in revenues
d) All                  Ans. b                  c) Shortfall in sales reserves & surplus
                                                d) Shortfall in sales reduction       Ans. b
113. The sources of-institutional funds are
progressively leaning towards shorter           119. This protects against expected losses &
redemption period due to uncertainties          deterioration in performance of the assets and
regarding _______                               is known as _______
a) Future insert & inflation                    a) Subordination
b) Exchange rate & inflation                    b) Over colleteralisation
c) Swapping                                     c) Both a & b
d) All                Ans. a                    d) None                      Ans. c

114. The term-lending institutions in India,    120. The counter guarantee extendedly
which extends loan for _______                  control Govt. for the fast track power projects
a) 10 to 15 yrs.                                & similarly the state Govt. guarantee for
b) 5 to 25 yrs.                                 enchaining fulfillment of debt servicing
c) 5 to 7 yrs.                                  obligations is an example—
d) None               Ans. c                    a) Credit allocation
                                                b) Credit enrichment
115. Capital market Financing includes          c) Credit enhancement
privately placed debentures but excludes        d) All                         Ans. c
_______
a) Short-term loan from FI‘s & bank             121. Escrow Account is the—
b) Long –term loans from FI‘s & bank            a) Special Reserve accounts
c) Both a & b                                   b) Cash reserve accounts
d) None               Ans. b                    c) Specialized financial intermediary A/C
                                                d) None                       Ans. a
116. The debt equity ratio for infrastructure
projects could go up to ____                    122. Escrow Accounts of SEBs are backed by
a) 1‖1                                          a
b) 2:1                                          a) Central Govt. Guarantee
c) 8:1                                          b) State Govt. Guarantee
d) 4:1                 Ans. d                   c) FI‘s Guarantee
117. The experience of Asian countries          d) Investment institution Guarantee
indicates that infrastructure financing from                                        Ans. b
the private sector generally includes direct
equity investment by sponsors, bank &           123. Which of the private sector firm is in
syndicated loans & participation by _____       infrastructure mgt. In India
a) Import credit agencies                       a) Tata



                                                                                 Page 14 of 18
FUNDAMENTALS OF INFRASTRUCTURE PROJECT FINANCING MB0016

b) Reliance                                     b) Special resource Accounts from the
c) LQT                                             concord Country
d) All                       Ans. e             c) LC‘s from the concerned country
Note: There is hardly any private sector        d) None                     Ans. a
infrastructure firm in India
                                                130. ―Securitization‖ can be defined as
124. ‗Financial guarantee‘ commonly referred    a) Sale of asset by its original investor
to as                                           b) Sale of equity share by its owner
a) Equity Insurance                             c) Sale of debt capital by its holder
b) Bond Insurance                               d) None                        Ans. a
c) Performance shares Insurance
d) All                       Ans. b             131. The concept ―Securitisation‖ originated
                                                and came into existence in ________
125. Financial Guarantee is a form of           a) USA, 1970
a) Credit enhancement                           b) U.K, 1990
b) Credit specification                         c) India, 1995
c) Credit enrichment                            d) None                      Ans. a
d) Credit enlargement         Ans. a
                                                132. Infrastructure financing is sand to be
126. The best e.g. of ‗Partial guarantee‘, is   ________
seen in                                         a) Non-recourse
a) Auto Insurance                               b) Recourse
b) Power Insurance                              c) Limited recourse
c) Road Insurance                               d) Unlimited recourse               Ans. A
d) Water Insurance           Ans. a
                                                Unit VI
127. World Bank does not guarantee
a) Debt capital                                 133. In the marketability of infrastructure
b) Equity capital                               activities, the following numbers has some
c) Performance capital                          significance; find out the correct one ______
d) All                      Ans. b              a) Activity 1 —least marketable
                                                b) Activity 2 —fair marketable
128. Which one of the following guarantee       c) Activity 3 —most marketability
―Equity Capital‖                                d) Activity 4 —Very high marketability
a) World Bank
b) IMF                                             1)   Only a & b are correct
c) Asian Development Bank                          2)   Only a & c are correct
d) MIGA                       Ans. d               3)   Only d are correct
Note: MIGA is an affiliate to World Bank but       4)   All are correct                Ans. 2
long stally difft. Functions (MIGA-
Multilateral International Guarantee Agency)    134. Although competitive provision of
                                                facilities (port infrastructure & air port
129. It is important to note that the World     runway & gates) is not economically
Bank‘s Guarantee requires a                     efficient, because it involves ______
a) Counter guarantee from the Govt. of the      a) Large fixed costs that are sunk
   country where the project in located         b) Less fixed costs that are sunk



                                                                                 Page 15 of 18
FUNDAMENTALS OF INFRASTRUCTURE PROJECT FINANCING MB0016

c) Large variable cost are sunk                   d) Credit Mkt.
d) Less variable cost are sunk       Ans. a                                              Ans. b

135. The concept ―Lease & concessions‖ are        141. Since Oct. 1994, individual banks are
appropriate option for operating                  permitted to give term loans up to Rs. ______
a) Tele communication                             to a single project without prior RBI approved
b) Roads                                          & maximum limit in _______
c) Parts & Airports                               a) Rs. 2 bn & Maxi. Limit —Rs. 5 bn
d) Water                      Ans. c              b) Rs. 2 million & Maxi. limit —Rs. 5 bn
                                                  c) Rs. 2 bn & Maxi. Limit —Rs. 5 million
UNIT-7                                            d) None                        Ans. a

136. Infrastructure output is generally not       142. The all India FI‘s stipulate a maximum
tradable across sovereign borders except in a     debt equity ratio of _____ for infrastructure
few cases like ______                             projects
a) Electricity                                     a) 1.5 : 1
b) Tele communication                              b) 2.5 : 1
c) Both                                            c) 4.5 : 1
d) None                      Ans. c                d) 2.5 : 1                   Ans. a

137. Infrastructure investment is invariably      143. The minimum fixed assets coverage
_____                                             ratio is stipulated at ______
a) Location specific                              a) 2 :1
b) Site-specific                                  b) 4 :1
c) Often jurisdiction specific                    c) 1.3 : 1
d) All                         Ans. d             d) 2.3 :1                     Ans. c

138. ______ leads to low credit quality of        144.    ________       Mobilize      long-term
projects in early years.                          Contractual saving in the country
a) Substantial sunk costs                         a) Insurance Co.
b) Substantial out of pocket cost                 b) Investment Co.
c) Substantial opportunity cost                   c) FI‘s
d) None                      Ans. a               d) None
                                                  e) None                       Ans. a
139. The best of Quasi-debt instruments are
____                                              145. In India, the World Bank has directly
a) Commercial paper & bond                        financed private sector Co. the name is
b) Warrants                                       ______
c) Preferred stock                                a) Tata Electric Co.
d) Both b & c              Ans. D                 b) Reliance Electrical
                                                  c) Philips (I) Ltd.
140. _____ is essential for importing liquidity   d) ECE Ltd.                Ans. a
for bond holders
a) Primary Mkt.                                   146. World Bank loan can be for 30-40% of
b) Secondary Mkt.                                 the project cost but this is mainly applicable
c) Debt Mkt.


                                                                                  Page 16 of 18
FUNDAMENTALS OF INFRASTRUCTURE PROJECT FINANCING MB0016

for public sector units with a maximum term     152. Which among the following from of
of 20 years which consists of _______           syndicated loan:-
a) 5- year grace + 15 year repayment            a) Extend commercial borrowings (ECB‘S)
b) 10- year grace + 10 year repayment           b) IFC‘S
c) 7- year grace + 13 year repayment            c) ECA‘S
d) 3- year grace + 17 year repayment            d) All                    Ans. a
                       Ans. a
                                                153. The employee provident fund (EPF),
147. Partial Risk Guarantee (PRG) covers the    which is currently managed by the _____
a) Political & country risk                     a) RBI
b) Mkt. & political risk                        b) SBI
c) Political & currency risk                    c) PNB
d) None                       Ans. a            d) BOB                      Ans. b

148. The PRG requires ______                    154. Which of the following recommendation
a) State govt. counter –guarantees              comes under Rakish Mohan Committee?
b) Central govt. counter –guarantees            a) Dividend could be made tax-free to the
c) Finance ministry counter –guarantees            individual shareholder.
d) External –Affairs ministry counter –         b) Dividend payable on equity investment in
    guarantees                                     infrastructure should be made cumulated
                               Ans. b           c) Both a& b
149. International Finance corporation (IFC)    d) None                      Ans. c
takes direct project exposure-----
a) With central govt. guarantee                 155. The concept of ―Roll over Bridge
b) With state govt. guarantee                   Financing‖ comes under ___
c) Without any govt. Guarantee                  a) Specialized financial Intermeddling
d) None                        Ans. c           b) World bank
Note: - See page No: 185 for more details on    c) ADB & MIGA
IFC.                                            d) IFC                        Ans. a

150. ―Complementary financing scheme‖           156. Non- discriminatory tax treatment is
(CFS) is a feature under _____                  applicable in case of_____
a) World Bank                                   a) Dividend
b) IMF                                          b) Interest
c) IFC                                          c) Capital gain
d) ADB                       Ans.d              d) All
                                                e) None                    Ans. d
151. Export credit agencies (ECA‘S) are
averse to project risk & usually require        Unit - VIII
institutional guarantee to cover the _____ of   157. The most important step that are likely to
the project.                                    enhance our ability to finance infrastructure
a) Commercial risk                              project are: -
b) NKT. Risk                                    a) Development of deep, liquid mkt. For
c) Demand risk                                      long-term debt.
d) Supply risk                Ans. a            b) Increasing the flow of funds from the
                                                    insurance sector



                                                                                 Page 17 of 18
FUNDAMENTALS OF INFRASTRUCTURE PROJECT FINANCING MB0016

c) Both a & b
d) None                      Ans. c             160. The private sector is expected to invest
                                                over Rs._____ by 2006 for telecom services
158. The insurance premium as a percentage      in India.
of GDP in India is ____                         a) Rs. 1000bn
a) Only 25%                                     b) Rs. 20,000bn
b) Only45%                                      c) Rs. 60,000bn
c) Only2%                                       d) None                             Ans. a
d) Only10%                Ans. c
                                                161. The basic service under Telecom sector
159. The Indian telecom network is the in the   will reach to _____ by 2006.
world                                           a) 64m
a) 25th largest                                 b) 10m
b) 40th largest                                 c) 100mn
c) 75th largest                                 d) None                            Ans. a
d) 14th largest             Ans. d




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