Islamic Finace Tutorial

Tutorial
1. Which of the following is among the fundamental principles of Islamic finance?

(A) Prohibition of interest
(B) Risk sharing
(C) Prohibition of speculative behavior
(D) All of the above
The answer is: (D) All of the above
2. A contract of sale where the seller declares his cost and profit to the buyer is
known as
(A) murabaha
(B) mudarabah
(C) musharakah
(D) takaful
The answer is: (A) murabaha
3. In a business contract where one party brings capital and the other personal
efforts in known as
(A) sukuk
(B) mudarabah
(C) musharakah
(D) takaful
The answer is: (B) mudarabah
4.In case of loss in a “Mudarabah Agreement “, the loss is borne by
(A) all the parties
(B) financier only
(C) entrepreneur only
(D) none of these
The answer is: (B) financier only
5.In case of loss in a “Mudarabah Agreement”, the bank passes on this loss to the
(A) depositors
(B) creditors
(C) mudarib
(D) loss is shared among parties
The answer is: (A) depositors
6.In Islamic finance, profits from sukuk can be derived from
(A) trading only
(B) investment only
(C) investment and trading
(D) trading and risk taking
The answer is: (D) trading and risk taking
7.Islamic Finance is strongly ________ oriented.
(A) profit
(B) money
(C) equity
(D) interest
The answer is: (C) equity
8.In Islamic Finance, the owner of capital ________ the profits made by the
entrepreneur.
(A) can share
(B) cannot share
(C) receive
(D) can never take
The answer is: (A) can share
9. The Islamic financial system regards “the time value of money” as
(A) interest
(B) rent
(C) loss
(D) profit
The answer is: (D) profit
10.The Islamic financial system regards “the monetary value of time” as
(A) interest
(B) profit
(C) loss
(D) rent
The answer is: (A) interest
11. In Sharia law and Islamic financing, “making money from money” is
(A) permitted
(B) not permitted
(C) permitted in certain cases
(D) permitted for Islamic banks only
The answer is: (B) not permitted
12. The Islamic financial system works on the basis of

(A) sharing return
(B) sharing risk
(C) sharing risk and return
(D) predetermined risk and return
The answer is: (C) sharing risk and return
13. In Islamic banking and finance, any deal must have an underlying ________
backing the deal.
(A) asset
(B) profit
(C) risk
(D) currency
The answer is: (A) asset
14. A “sukuk” is basically a Shariah-compliant

(A) loan
(B) profit
(C) bank cheque
(D) investment certificate
The answer is: (D) investment certificate
15. “Takaful” is basically a Shariah-compliant

(A) loan
(B) insurance
(C) investment
(D) ownership
The answer is: (B) insurance
16. Which from the following is/are NOT permitted under Islamic Financial
Principles?
I. Interest
II. Short selling
III. Non-asset backed derivatives
(A) I only
(B) I and II
(C) I and III
(D) I, II and III
The answer is: (D) I, II and III
17. The differences between Islamic bank and conventional bank are –
A. the prohibition of riba (interest, usury),
b. gharar (excessive uncertainty) and haram (impermissible) activities.
C. the implementation of profit and loss sharing (PLS) principle.
D.the emphasis on productivity and real economic activity (rather than credit
worthiness).
E. all of the above.
Answer :E
18. A method where payments are prepared in phases to aid stage wise progress in
Manufacturing / processing / building works is
A. Istisna
B. ijarah wa iqtna
C. takaful
D. wadia
Answer :A
Example on murabaha:
Muhammad and his family would like to purchase a condo which costs $240,000.
To do so, Muhammad would work with Devon Islamic to purchase the condo.
Devon Islamic would purchase the condo for Muhammad from the seller for
$240,0000 and sell it to Muhammad for $286,000 to be paid in monthly
installments over a 15-year period. The scheduled monthly payment not including
insurance and taxes would be $1,586.21. The $286,000 that Muhammad would pay
for his condo would be a fixed amount to Devon Islamic which owns the home
now. The extra amount Muhammad pays along with the cost of the condo listed by
the seller is a 2.375%(APR)* profit rate which is not interest as it is offered as a
fixed payment without any additional costs, hence making this transaction Shariah
compliant. While late charges may be applicable but contract balance is not
compounded.
*Rates are subject to change & financing subject to approval. Payments do not
include amount for taxes and insurance premiums.
*APR = Annual Percentage Rate

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Tutorial

1. Which of the following is among the fundamental principles of Islamic finance?

The answer is: (B) not permitted

12. The Islamic financial system works on the basis of

The answer is: (C) sharing risk and return

The answer is: (A) asset

14. A “sukuk” is basically a Shariah-compliant

The answer is: (D) investment certificate

15. “Takaful” is basically a Shariah-compliant

The answer is: (B) insurance

*APR = Annual Percentage Rate

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