Introduction to Islamic Finance Chapter 1-2

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What is the fundamental principle of 'Freedom from Al-Gharar' in Islamic finance?

Speculation based on luck is permissible in Islamic finance

All forms of contracts and transactions must be free from excessive uncertainty and ambiguity (correct)

Informed speculation is prohibited in Islamic finance

Trading in commodities that are not in possession is allowed

What is the primary objective of the 'Freedom from Price Manipulation' principle in Islamic finance?

To ensure a free market where prices are determined by forces of demand and supply (correct)

To fix prices to ensure profit for businesses

To control prices through market manipulation

To regulate prices through government intervention

What is the Islamic perspective on trading in permissible commodities or property?

It is permissible only for Muslims

It is permissible as long as it is undertaken in permissible commodities or property (correct)

It is prohibited in all cases

It is only permissible if it involves an element of coercion or force

What is the prohibited element in contracts and transactions according to the principle of 'Freedom from Al-Riba'?

Interest Signup and view all the answers

What is the exception to the rule of 'Freedom from Price Manipulation' in Islamic finance?

Price fixation and control only in cases of anomalies caused by impairment of free competition Signup and view all the answers

What is the condition for speculation to be permissible in Islamic finance?

It must be based on collection, analysis, and interpretation of relevant information Signup and view all the answers

What is the primary reason why the modern financial system is not consistent with the tenets of Islam?

It is based on interest, which is forbidden in Islamic Law Signup and view all the answers

What is the role of the mudarib in a Mudarabah agreement?

To provide entrepreneurship and management Signup and view all the answers

What is the main difference between an unrestricted and a restricted Mudarabah contract?

The specification of the period, place of business, or specific line of trade Signup and view all the answers

What is the responsibility of the mudarib in case of losses due to his negligence?

The mudarib is responsible for all losses due to his negligence Signup and view all the answers

What is the primary objective of the Mudarabah agreement?

To earn profits by sharing risks and rewards Signup and view all the answers

What is the role of the sahib al-mal in a Mudarabah agreement?

To provide capital and act as a sleeping partner Signup and view all the answers

What is the primary characteristic of an Istisna purchase order contract?

The buyer and seller agree on the sale and purchase prices Signup and view all the answers

What is the primary difference between Takaful and conventional insurance?

The investment of premium money Signup and view all the answers

What is the underlying principle of Sukuk investment certificates?

Musharakah (profit-sharing) Signup and view all the answers

What is the basis of the ethical aspects in Islamic finance?

The Quran and the Sunnah Signup and view all the answers

What is the primary role of the lessor in an Ijarah contract?

To lease out an asset Signup and view all the answers

What is the primary characteristic of a Sukuk investment certificate?

It is a tradable certificate Signup and view all the answers

What is the primary responsibility of a Mudarib in a Mudarabah contract?

To manage the business and share the profit Signup and view all the answers

In a Musharakah contract, how is the proportion of profit distributed among partners?

According to the actual profit earned Signup and view all the answers

What is the primary characteristic of a Bai-al-Salam contract?

Immediate payment and deferred delivery Signup and view all the answers

What is the main difference between Musharakah and Mudarabah in terms of investment?

All partners invest in Musharakah, while the Rabb-ul-mal invests in Mudarabah Signup and view all the answers

What is the liability of partners in a Musharakah contract?

Unlimited, but shared among partners Signup and view all the answers

What is the purpose of a Murabahah contract?

To effect a sale and purchase transaction for the financing of an asset Signup and view all the answers