APSET Paper 2 Mock Test - 7 (Commerce) - AP TET MCQ

The correct answer is interest rates are low and expected to remain low.

Key Points Call-Option value:

• The call-option value of a callable bond represents the additional value of the option to call (redeem) the bond before maturity.
• The value of the call option is determined by the difference between the market interest rate and the coupon rate of the bond, as well as the remaining time to maturity and the call price.
• The call-option value of a callable bond is likely to be high when interest rates are falling.
• The call-option value of a callable bond is likely to be high when interest rates are low. This is because when interest rates decrease, the issuer of the bond has the incentive to call (redeem) the bond and refinance it at a lower interest rate.
• When interest rates are low, the probability of the bond being called by the issuer increases, and this expectation of early redemption enhances the value of the call option embedded in the bond.
• This is because when interest rates fall, the value of the callable bond increases due to its higher coupon rate relative to prevailing market rates.
• As a result, the issuer is more likely to exercise the call option and redeem the bond before maturity to refinance at a lower cost of borrowing.

Hence, the correct answer is interest rates are low and expected to remain low.

The correct answer is Internal sources are more important for a firm than external forces for competitive advantage. 

Key Points

Resource Based approach: 

• The Resource-Based View (RBV) is a group of theories proposing that companies are able to establish a competitive advantage through internal resources of the firm that are valuable, rare, not imitable, and organized for value capture. 
• Organizations use internal resources in new ways to exploit external resources and thereby establish competitive advantage rather than focusing on the competitive environment. 
• Research in support of the RBV includes the Knowledge-Based View of the firm, dynamic capabilities, and the relationship view.
• RBV (Resource-Based View) theorists argue that a firm's internal resources and capabilities are more important than external factors in achieving and sustaining competitive advantage.
• They believe that a firm's resources and capabilities, such as its brand, patents, and organizational structure, can give it a strategic advantage over its competitors.
• Tangible assets are physical things, such as land, buildings, machinery, equipment, and capital. 
• Intangible assets are non-physical things, such as intellectual property, skills, knowledge, goodwill, brand reputation, etc. 
• Physical resources rarely offer a competitive advantage - as they can generally be acquired by competitors.
• Intangible resources are difficult to imitate and generally offer the main source of sustainable competitive advantage.
• If all of these elements align, the resources can be used by a company to create a sustainable competitive advantage.  

Hence, Under the resource-based approach, Internal sources are more important for a firm than external forces for competitive advantage. 

The correct pair is: A- 4, B- 1, C- 3, D- 2.

Competition Act, 2002

• Competition is the act of the sellers individually seeking to acquire the patronage of buyers in order to achieve profits or market share.
• The Competition Act, 2002 was enacted by the Parliament of India.

RTI Act, 2005

• It is an Act to provide for setting out the practical regime of right to information for citizens to secure access to information under the control of public authorities, in order to promote transparency and accountability in the working of every public authority, the constitution of a Central Information Commission and State Information Commissions and for matters connected therewith or incidental thereto.

The Indian Contract Act, 1872

• It prescribes the law relating to contracts in India and is the key act regulating Indian contract law.
• The objective of the Contract Act is to ensure that the rights and obligations arising out of a contract are honored and that legal remedies are made available to an aggrieved party against the party failing to honour his part of the agreement.

Sale of Goods Act 1930

• It was introduced with the objective of balancing the rights, duties, claims, and expectations arising in the process of transferring property from one person to another i.e of buyers and sellers.

Key Points

CONFLICT MANAGEMENT AT WORKPLACE:

• A conflict arises when individuals have different opinions, thought processes, attitudes, interests, and needs and find it difficult to adjust to each other. When individuals perceive things in dissimilar ways and cannot find the middle way, a conflict starts. 
• No organization can survive if the employees are constantly engaged in fights and conflicts. The individuals have to give their hundred per cent at the workplace to generate revenue and profits for the organization.
• Conflicts must be avoided at workplaces for a healthy and competitive environment. Employees must ensure that precautionary measures are taken in advance to prevent conflicts at the workplace.
• Employees are the assets of any organization and they must feel motivated and elated to perform well. Conflicts only lead to tensions and depression and nothing productive comes out of it. No individual can work alone; he has to depend on his fellow workers for the maximum output. Every individual has to work in a team and can’t afford to fight with his team members.
• Conflict Management prevents the eruptions of fights and also allows the employees to be serious about their work.
• Conflicts also lead to unnecessary tensions and disagreements among individuals.
• Conflict Management reduces tensions and employees feel motivated to give their level best to the organization. No one gains from conflicts. One should avoid fighting over petty issues and criticizing fellow employees at the workplace.
• Conflict Management plays a very important role at workplaces as it prevents unnecessary fights and makes offices a better place to work.

The correct answer is convenience products.

Key Points

• Any good or service you offer to satisfy a customer's need or desire is a product.
• There are both real and virtual ones. Durable things (such as automobiles, furniture, and computers) and nondurable items are examples of physical products (like food and beverages).
• Services or experiences are offered as virtual products (such as education, software, and streaming services).
• A product could also be a hybrid, containing both real-world and digital components (like a kitchen appliance with its own mobile app).
• As traditionally analog items combine digital technology to better reach and serve customers, hybrid products are becoming more widespread.

 Important Points

Convenience Goods: Convenience goods are regularly bought and require minimal preparation or effort. They are frequently affordable, readily available, and simple to purchase.

For example, periodicals, on-demand applications, and services

Features of Convenience Goods

• Lack of durability
• Convenience stores frequently have them in stock.
• Contains fewer items and is cheaper
• Typically, it only comprises standardized goods.
• Advertising campaigns and promotions are important for its sale.
• Constantly in demand

Note: Creams and medicines are the types of convenience goods because it requires minimal preparation and effort to purchase.

Additional Information

• Shopping Goods: Shopping items cost more and are bought less frequently than convenience items. Before making a purchase, consumers weigh factors like quality, design, and cost. For instance, clothing lines and airline tickets
• Specialty Goods: Products that fit into a certain market or niche have attributes that appeal to that market. In order to reach the correct consumers, this type of product needs more focused advertising. For illustration, consider applications for the real estate or banking markets.
• Unsought Goods: Few buyers are aware of or actively seek out unsought products. Customers do not have an immediate need for these products, hence direct benefit promotion is required to spark interest. Examples include life insurance and dictionaries.

Assertion (A): Consumers need to be given legal protection against certain trade practices and business methods.

Explanation:

1. Consumers need to be given legal protection against certain trade practices and business methods as a seller may use unfair trade practices which can harm the consumer financially as well as in health regard.
2. Thus, Consumer Protection Act, 1986 (CPA) is enacted that provides for effective protection of the interests of consumers and as such makes provision for the establishment of consumer councils and other authorities that help in the settlement of consumer disputes and matters connected therewith.
3. Thus, the assertion is correct.

Reason (R): Protection as per market forces and 'Caveat Emptor' is not enough as a perfectly competitive market is an economist's dream and consumer sovereignty is a myth.

Explanation:

1. Caveat emptor is Latin for "let the buyer beware."
2. A doctrine that often places on buyers the burden to reasonably examine the property before purchase and take responsibility for its condition.
3. It is especially applicable to items that are not covered under a strict warranty.
4. The rule of 'Caveat Emptor' has many drawbacks in the sense that consumers might not be educated enough to understand the technical aspects of goods purchased by them.
5. Thus, it is not enough protective measure against consumer exploitation.
6. Consumer sovereignty is an economic concept where the consumer has some controlling power over goods that are produced and the idea that the consumer is the best judge of their own welfare.
7. However, in reality, consumer choice is affected by marketing strategies and marketers resort to advertising tactics that blindfold the consumer.
8. 'Consumer Sovereignty' is a myth.

Thus, even though the reason is correct, it doesn't justify the assertion.

The correct answer is Form 16/16A.

Key Points

• According to Section 203 of the Income-Tax Act of 1961, Form 16 is a document or certificate that Indian salaried professionals' employers must provide.
• It is also known as a "salary certificate," because it contains all the information regarding the pay that employee received from their employer or organisation for a specific financial year, as well as the income tax that was deducted from that pay by the payer.

Important Points

• Form 16/16A: The certificate of tax deducted at source, or Form 16/ 16A, is given out when tax is deducted by the employer on behalf of the employees.
• These certificates offer TDS/TCS information for numerous transactions involving the deductor and the deductee. These certificates must be sent to taxpayers by law.

Difference between Form 16 and Form 16A:

Hence, it can be concluded that Form 16/16A is a certificate of tax deduction at source and is issued on behalf of the employees by their employer for deducting tax. These certificates provide TDS/TCS returns of various transactions between the deductor and the deductee. For taxpayers, it is mandatory to issue these certificates.

All the above options are sources of short-term finance. Here, the emphasis is on short-term financings such as trade credit, commercial paper, and other forms of instruments with a maturity structure of one year or less. Short term finance is type of business financing where it is obtained for a year or less. The sources of short term finance are: trade credit, cash advance loan and short term borrowings.

Residential status's conditions: A person is in India for 182 days or more in that financial year or is in India for 60 days or more during that financial year and has been in India for 365 days or more during 4 previous years immediately preceding the relevant financial year. If an individual satisfies any one of the above conditions, he is treated as a resident of India.

The correct answer is Option 3

Key Points Business Economics:

• Business economics is a branch of applied economics that looks into the financial, organisational, market-related, and environmental concerns that businesses confront.
• The concept of scarcity, product factors, distribution, and consumption are all covered in business economics.
• Managerial economics is a branch of business economics that is very important.

Important Points

Features of Business Economics

• Business Economics is related with the micro-economics. It is micro in nature. It is mainly related with the problems of individual unit. Hence, Statement (i) is correct
• Business Economics helps to formulate the economic policy, Taxation policy, credit policy. Import-Export policy etc. it is considered as Normative in nature. Normative Economics helps to solve the particular economic problems and formulation of economic policies. e. g. concept of elasticity of demand is used to determine the price of a product, as well as to impose the tax on a commodity. Hence, Statement (ii) is incorrect.
• Business Economics is both conceptual and metrical. It outlines, the conceptual framework to understand, analyse and solve the decision making problems of any business. It also makes the use of various quantitative techniques from various subjects to solve the problems of any business. Hence, Statement (iii) is correct.
• Business Economics primarily uses the theory of markets and private enterprises. It uses the theory of the firm and resource allocation in a private enterprise economy. Hence, Statement (iv) is correct.

Reserve Bank of India (RBI) is India’s central bank. It controls the monetary policy concerning the national currency, the Indian rupee. The basic functions of the RBI are the issuance of currency, sustaining monetary stability in India, operating the currency, and maintain the country’s credit system.  

Important Points

The State Bank of India has been established to operate on the normal commercial principles, with the only difference that, unlike other commercial banks in the country, it takes into consideration and responds in a progressively liberal manner the financial requirements of cooperative institutions and small scale industries, particularly in the rural areas of the country.

• The State Bank of India acts as an agent of the Reserve Bank in all those places where the latter does not have its branches.
• As an agent of the Reserve Bank, the State Bank performs the following functions:
  • It acts as the government’s bank, i.e., it collects money and makes payments on behalf of the government and manages public debt.
  • It acts as the bankers’ bank. It receives deposits from and gives loans to commercial banks.
  • It also acts as the clearing house for the commercial banks, rediscounts the bills of exchange of the commercial banks and provides remittance facilities to the commercial banks.

Thus, it is clear that the State Bank of India works as RBI's agent at places where it has no office of its own.

The correct answer is Product

Key Points

•  Marketing mix: Marketing mix involves set of actions and strategies that a company decides to follow as its marketing plan to carry out the function of marketing in a better way to persuade the customers to buy the products. It involves the key focus areas of the marketing plan.
• The key focus areas are classified into the following categories which are generally called as 4P's: 
  • ​Product
  • Price
  • Place 
  • Promotion

Important Points

•  Product: Product is the item or service that satisfies the consumer want. This aspect of marketing mix deals in making, innovating or designing the product effectively so that it provides the value to the customer and also satisfies his need better than the competitor product.

Additional Information

• Selling: Selling is the process of delivering the service or transferring the ownership of the goods in exchange for money or any other monetary benefit.
• Costing: Costing is a process of classifying, recording and allocating the different costs incurred by the company in the event of making a product or service to ascertain the correct price for the good or service.

The correct answer is Rs.500 crores.

Key PointsCorporate social responsibility (CSR): CSR is a self-policing corporate strategy that enables an organisation to be socially accountable to its customers, employees, and stakeholders. CSR helps in enhancing a number of societal facets as well as enhancing the reputation of businesses.

Important PointsCSR is in effect as of April 1, 2014. For the following businesses, Section 135(1) of the Company Act of 2013 mandates CSR expenditure and CSR Applicability: Each business with

• a net value of Rs.500 crore and
• a revenue of Rs.1000 crore or
• Rs.5.00 crore in net profit

When net profit does not include income from an overseas branch and is distributed to each firm, this section applies. Companies who previously met the aforementioned criterion for three consecutive years but no longer do so are exempt from the requirement to adhere to CSR provisions.

Thus, Under the Companies Act, 2013, companies with net worth of Rs.500 crores have to spend on CSR.

The given demand equation is CX = 20 - 10Px + 0.002I + 20Py

where,

• Px = $4
• I = $40,000
• Py = $5

If we substitute the given values in the demand equation, we get the monthly consumption of ice-cream

CX = 20 - 10Px + 0.002I + 20Py

= 20 – 10 (4) + 0.002 (40000) +20 (5)

= 20 – 40 + 80 + 100

= 160

Therefore, the family consumes 160 ounces of ice cream in a month.

The correct answer is Amazon.com

Key Points

• A market challenger is a firm striving to increase its market share and replace the market leader.
• Usually, they are the second-largest dominant company in the market.
• They have sufficient resources and capabilities to aggressively challenge market leaders and undermine their dominance.
• Amazon.com is an example of a market challenger trying to steal Ebay’s market share in the online retail business.
• And, in general, you can find examples of market challengers at the second-largest companies in the industry.
• They may also be a third or fourth company if the difference in dominance (market share) is small relative to the market leader.

Statement I: Intellectual Property (IP) is a category of property that includes intangible creations of the human intellect.

Explanation:

1. Intellectual property (IP) refers to creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names, and images used in commerce.
2. Intellectual property is an umbrella term for a set of intangible assets or assets that are not physical in nature.
3. Intellectual property (IP) is a category of property that includes intangible creations of the human intellect.
4. There are many types of intellectual property, and some countries recognize more than others.
5. The most well-known types are copyrights, patents, trademarks, and trade secrets. Thus, the statement I is correct.

Statement II: IPR does not include trade secrets and moral rights.

Explanation:

Intellectual property can consist of many types of intangibles, and some of the most common are listed below:

1. Trademarks: Trademarks are the names, phrases, and symbols that differentiate your brand from others in your industry. They must be distinctive and used in commerce to sell or promote a product or service.
2. Copyrights: A copyright grants legal rights to anything you create that expresses or embodies an idea. It gives you exclusive rights to copy, distribute, reproduce, display, and license the work.
3. Patents: Patents are granted for new, useful inventions, and they will give you the right to prevent others from making, using, or selling your invention.
4. Trade Secrets: A trade secret is a piece of confidential business information whose secrecy gives you an advantage over your competitors.
5. Moral Rights: Moral rights are personal legal rights belonging to the creator of copyright works and not be transferred, assigned, or sold. Moral in other words-“Moral rights are the rights individual creators have in relation to copyright works or films they have created.
6. Franchise: A franchise is a license that a company, individual, or party–called the franchisee–purchases allowing them to use a company's–the franchisor–name, trademark, proprietary knowledge, and processes.

Thus, statement II is incorrect.

Option 3 is the correct answer.

The correct answer is They necessitate recalibration of financial structures.

Key Points

• In the passage, "Sudden policy changes, regulatory reforms, and shifts in government priorities have the potential to disrupt established business models and strategies.
• "The passage explicitly states that sudden policy changes have the potential to disrupt established business models.
• This disruption implies that businesses may need to recalibrate their financial structures to adapt to the new policies, aligning with option 2.
• The other options (1. They have no effect on established business models, 3. They enhance international collaborations, 4. They lead to increased regulatory reforms) do not accurately represent the impact described in the passage.

The correct answer is regain possession.

Key Points

• Stoppage in transit" refers to a situation in logistics and transportation where a shipment or goods are halted or detained while they are in transit from the point of origin to the final destination.
• This can happen for various reasons, and it has implications for both the sender (consignor) and the receiver (consignee) of the goods.

Important PointsConditions for Exercising the Right -

• For the right of stoppage in transit to be valid, certain conditions must be met. These conditions include:
• The seller must be unpaid and must have a lien on the goods (i.e., the right to retain possession until payment is made).
• The buyer must be insolvent or must have failed to make the payment.

Objective of 'Stoppage in Transit' -

• The primary objective of exercising the right of stoppage in transit is not to recover the price or damages, but rather to retain possession of the goods until payment is made.

Retaining Possession vs. Recovering Price or Damages -

• While the seller's ultimate goal is to receive the payment for the goods, the direct action taken under "stoppage in transit" is to regain or retain possession of the goods until the financial obligation is met by the buyer.

Effect on Legal Rights -

• When the seller exercises the right of stoppage in transit, they essentially suspend the buyer's right to take possession of the goods. This is a legal remedy available to the seller.

Confusion Points retain possession v/s regain possession

There may be a little bit of confusion between options retain possession v/s regain possession. But the correct answer is to regain possession. It is the primary objective because until/without regaining the possession it is not possible to retain possession.

The correct answer is 10%

Key PointsTDS is required to be deducted at the rate of –

• 2% in case of fees for technical services (not being professional services) or royalty in the nature of consideration for sale, distribution or exhibition of cinematographic films; and
• 10% in other cases.

Additional InformationNo tax deduction is required if the amount of fees or the aggregate of the amounts of fees credited or paid or likely to be credited or paid during a
financial year does not exceed 30,000 in the case of fees for professional services, 30,000 in the case of fees for technical services, 30,000 in the
case of royalty and 30,000 in the case of non-compete fees. The limit of 30,000 under section 194J is applicable separately for fees for professional services, fees for technical services, royalty, and non-compete fees referred to in section 28(va).

The correct answer is ​Both assertion and reason are true, and the reason is the correct explanation of the assertion.

Key Points

Assertion: Relying heavily on digital communication may hinder the development of genuine connections.

Explanation: Digital communication, such as text messages, emails, or social media interactions, lacks the richness of face-to-face communication. It may lead to a sense of detachment and impersonality, making it harder for individuals to establish deep, meaningful connections with others. Genuine connections often require emotional bonding and understanding, which can be challenging to achieve solely through digital means.

Reason: The absence of non-verbal cues in digital communication can lead to misinterpretations and misunderstandings.

Explanation: Non-verbal cues, such as facial expressions, body language, tone of voice, and eye contact, play a crucial role in human communication. These cues help convey emotions, intentions, and context, allowing people to better understand each other's feelings and intentions. In digital communication, these cues are mostly absent, leading to potential misinterpretations of messages and misunderstandings between individuals. A simple text message can be interpreted in various ways without the accompanying non-verbal cues to clarify the sender's true intent.

The correct answer B, D and E only.

Key Points

• Bear extraordinary expenses: It's the bailor's responsibility to cover any exceptional expenses incurred in connection with the bailed goods.
• Indemnify the bailee: The bailor has the duty to safeguard the bailee from any losses that may arise due to the defects in the bailed goods that he/she was unaware of.
• Disclose known faults: If there are any known defects in the goods that could potentially cause harm, it's the bailor's duty to inform the bailee. Failure to do so means the bailor is responsible for damage caused to the bailee.
• Return accretion to the goods: Technically, this is not a responsibility of the bailor under traditional bailment concepts. Accretions or any kind of benefits or profits derived from the goods generally go to the bailee unless there's a different agreement in place.
• Take care of goods: This is generally the responsibility of the bailee who has temporary possession of the bailed goods, not the bailor.

All of the above are the provisions of the Right to Information Act, 2005.

Right to Information (RTI),2005, is an act set up by the Parliament of India that frames the procedures and rules for the right to information to the citizen. RTI is replaced by the Freedom of information act, 2002. The following are the features of the RTI Act:

• It promotes accountability and transparency in every public authority.
• It promotes effective and timely dissemination of correct information by the public authority to any individual.
• It promotes the establishment of district, state, and central level information commission as an appellate body.

Price level Accounting or inflation accounting refers to the adjustment of financial statements of the company as per price indexes cause the historical figures and book values of the statements are no longer of any significance.

Therefore, the only statement I is correct.

The correct combination is (a) - (ii), (b) - (iii), (c) - (iv), (d) - (i)

All statutory powers for regulating Indian capital market are vested with SEBI itself. To safeguard the interests of investors and to regulate the capital market with suitable measures. To regulate the business of stock exchanges and other securities market.

Monetary policy is the macroeconomic policy laid down by the Reserve Bank of India. It involves the management of money supply and interest rates. The central bank tweaks interest rates to achieve macroeconomic objectives such as liquidity, consumption and inflation.

Accordingly, Telecom Regulatory Authority of India (TRAI) was established in the year 1997 in pursuance of TRAI (Ordinance) 1997, which was later replaced by an Act of Parliament, to regulate the telecommunication services.

The Insurance Regulatory and Development Authority of India (IRDAI) is an autonomous, statutory body tasked with regulating and promoting the insurance and re-insurance industries in India.

The correct answer is A, B and D only.

Key PointsUndue influence typically arises in relationships where there is an inherent imbalance of power, leading one person to take advantage of the other. The imbalance of power often arises from superior knowledge, influence, or resources.
Additional Information

• Parent and child: A parent often has more knowledge, resources, and general life experience than a child. If a parent were to cause their child to enter into an agreement that primarily benefits the parent or even act against the child's interest, it could be seen as undue influence since the child trusts and is dependent on the parent.

• Doctor and patient: Patients typically trust their doctors for their specialized knowledge and advice. If a doctor, owing to this trust-based relationship, advises the patient to perform an act or make a decision that unduly benefits the doctor, it could be considered undue influence. The rationale is that the patient often may not have the same level of knowledge to evaluate whether the decision is in their best interest.

• Fiance and fiancee: Although not typically seen as exploitative, a relationship between fiances could, in specific circumstances, have an imbalance of power leading to undue influence. If one party is more dominant, controlling or is in a superior position regarding resources and uses these advantages to influence the decisions or actions of the other in a way that primarily benefits them, it might be seen as undue influence. This is because the person on the receiving end is often emotionally invested and trustful of their partner and might agree to decisions in the name of their relationship that they wouldn't otherwise agree to.

• Husband and wife: Relationships between husbands and wives can certainly involve trust, dependency, and in some cases, imbalances of power that may lead us to think about undue influence. However, the dynamics of each marital relationship can vary widely. It's not a given that one spouse necessarily occupies a position of dominance over the other. Legally, spouses are typically seen as equal partners, and there's an expectation of joint decision-making and mutual consent. Hence, this relationship does not automatically imply undue influence and is classified as incorrect in this context.

• Creditor and debtor: In a creditor-debtor relationship, the creditor could theoretically exert pressure on the debtor, especially in cases of substantial debt. However, this relationship primarily relates to financial obligations and repayments, which are typically clearly delineated in a loan or credit agreement. Thus, the "influence" that a creditor has over a debtor is usually confined to enforcing the agreed-upon terms of the debt repayment rather than having broad influence over the debtor's decisions. Issues that occur in this context are more likely to be about duress or financial coercion, which, although similar to undue influence, are distinct legal concepts. Thus, it does not usually raise presumptions of undue influence, making it incorrect in this context.

Therefore, from the above explanation, it is clear that option 2) is the correct answer.
Important Point

CAPM Formula:

Where,
E(Ri): Expected return of the asset, 
Rf: Risk-free rate of interest
βi: Asset’s sensitivity to market return, 
E(Rm): Expected return of the market.

The current account net Invisibles record the receipts and payments with respect to

• Services
• Transfers
• Remittance

Services: Export and import of services is recorded under net invisible. It includes travel, transportation, insurance, Government Not Included Elsewhere(GNIE) and miscellaneous services.

Transfers: It includes grants gifts etc which do not need to be compensated or reciprocated. Once it is received it need not be repaid.

Remittance: These are the transfers sent to native countries which are directly earned by labour or workers in foreign countries.