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'?

    <p>Interest</p> Signup and view all the answers

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

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

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

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

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

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

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

    <p>To provide entrepreneurship and management</p> Signup and view all the answers

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

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

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

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

    What is the primary objective of the Mudarabah agreement?

    <p>To earn profits by sharing risks and rewards</p> Signup and view all the answers

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

    <p>To provide capital and act as a sleeping partner</p> Signup and view all the answers

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

    <p>The buyer and seller agree on the sale and purchase prices</p> Signup and view all the answers

    What is the primary difference between Takaful and conventional insurance?

    <p>The investment of premium money</p> Signup and view all the answers

    What is the underlying principle of Sukuk investment certificates?

    <p>Musharakah (profit-sharing)</p> Signup and view all the answers

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

    <p>The Quran and the Sunnah</p> Signup and view all the answers

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

    <p>To lease out an asset</p> Signup and view all the answers

    What is the primary characteristic of a Sukuk investment certificate?

    <p>It is a tradable certificate</p> Signup and view all the answers

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

    <p>To manage the business and share the profit</p> Signup and view all the answers

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

    <p>According to the actual profit earned</p> Signup and view all the answers

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

    <p>Immediate payment and deferred delivery</p> Signup and view all the answers

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

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

    What is the liability of partners in a Musharakah contract?

    <p>Unlimited, but shared among partners</p> Signup and view all the answers

    What is the purpose of a Murabahah contract?

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

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