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CBSE Questions for Class 12 Commerce Business Studies Financial Market Quiz 7 - MCQExams.com
CBSE
Class 12 Commerce Business Studies
Financial Market
Quiz 7
It is a market for short-term funds which deals in monetary assets whose period of maturity is up to one year.
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Money market
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Capital market
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Secondary market
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Primary market
Explanation
The money market is a market for short term funds which deals in monetary assets whose period of maturity is upto one year. These assets are close substitutes for money. It is a market where low risk, unsecured and short term debt instruments that are highly liquid are issued and actively traded.
Who issues a treasury bill?
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Reserve Bank of India
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Any private sector bank
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Any nationalised bank
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All of the above
Explanation
A Treasury bill is an instrument of short-term borrowing by the Government of India maturing in less than one year. They are also known as Zero Coupon Bonds issued by the Reserve Bank of India on behalf of the Central Government to meet its short-term requirement
of funds.
Under this method of floatation in primary market, a subscription is invited from general public to invest in the securities of a company through the issue of advertisement.
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Offer for sale
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Private placement
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Offer through prospectus
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All of the above
Explanation
Offer through prospectus is the most popular method of raising funds by public companies in the primary market. This involves inviting subscription from the public through issue of prospectus. A prospectus makes a direct appeal to investors to raise capital, through an advertisement
in newspapers and magazines
is a number assigned to each transaction by the stock exchange and is printed on the contract note.
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Contract Note
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PAN number
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Unique Order Code
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None of the above
Explanation
After the screen-based trade has been executed, within 24 hours, the broker issues a Contract Note. This note contains details of the number of shares bought or sold, the price, etc. A Unique Order Code number is assigned to each transaction by the stock exchange and is printed on the
contract note.
The mandatory detail that an investor has to provide to the broker at the time of opening a demat account is
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Bank account details
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Residential status (Indian/NRI)
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PAN number
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Date of birth and address
Explanation
The investor has also to provide certain details and
information while opening a demat account. These include:
1.
PAN number (this is mandatory).
2. Date of birth and address.
3.
Educational qualification and occupation.
4. Residential status (Indian/NRI).
5. Bank account details.
One of the common irregularities noted by the Securities and Exchange Board of India during the inspection of a stock exchange was that it was dealing with unregistered sub-brokers. Identify the related function of Securities and Exchange Board of India.
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Developmental function
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Regulatory function
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Protective function
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None of the above
Explanation
The Regulatory function of SEBI includes:
1. Registration of brokers and sub brokers and other players in the
market.
2.
Regulation of stock brokers, portfolio exchanges, underwriters and merchant bankers and the business in stock exchanges and
any other securities market.
3.
Calling for information by undertaking inspection, conducting enquiries and audits of stock
exchanges and intermediaries.
To be listed on OTCEI, the minimum capital requirement for a company is ________.
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Rs. $$3$$ crores
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Rs. $$5$$ crores
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Rs. $$10$$ crores
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Rs. $$25$$ crores
Explanation
The minimum capital requirement for a company to be listed on the OTCEI is Rs 3 crores and the maximum is Rs 50 crores.
Section $$131$$ of the Negotiable Instruments Act extends protection to the __________.
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collecting banker
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paying
banker
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advising
banker
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confirming
banker
Explanation
Under this Section, a collecting bank has protection only if the collecting bank, in good faith and without negligence, receives payment of the customer by a cheque, i.e. if there is negligence in receiving of a cheque on behalf of the customer, the collecting bank would be liable for negligence.
Match the following:
(a) Credit Control
$$1.$$ MCA
(b) Corporate Control
$$2.$$ SEBI
(c) IPO Control
$$3.$$ IRDA
(d) ULIP Control
$$4.$$ RBI
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$$(a) - (4), (b) - (2), (c) - (3), (d) - (1)$$
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$$(a) - (4), (b) - (1), (c) - (2), (d) - (3)$$
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$$(a) - (2), (b) - (3), (c) - (4), (d) - (1)$$
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$$(a) - (4), (b) - (1), (c) - (3), (d) - (2)$$
Explanation
Credit control is an important tool used by Reserve Bank of India. Credit control in the economy is required for the smooth functioning of the economy.
Corporate governance guidelines are laid down by several committees appointed by the Ministry of Corporate Affairs (MCA), for the smooth running of the organisations.
SEBI regulates the stock markets operations and the IPOs in India.
ULIP are regulated under the guidelines of IRDA
Appointment of independent directors is the part of Corporate Governance as per the ________.
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SEBI
0%
Indian companies act
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Government of India
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RBI
Match the following:
List-I
List-II
(i) National Stock Exchange
(a) Marks the beginning of the process of dematerialisation of shares of the participating companies.
(ii) National Securities Depository Limited
(b) Facilitation of equal access to investors across the country.
(iii) Securities and Exchange Board of India
(c) To foster the development of an active secondary market for Government Securities.
(iv) Securities Trading Corporation of India
(d) Abolition of Capital issues control and retaining the sale authority for new capital issues
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$$(i) - (b), (ii) - (a), (iii) - (d), (iv) - (c)$$
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$$(i) - (a), (ii) - (b), (iii) - (c), (iv) - (d)$$
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$$(i) - (a), (ii) - (b), (iii) - (d), (iv) - (c)$$
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$$(i) - (d), (ii) - (c), (iii) - (b), (iv) - (a)$$
Explanation
National Stock Exchange of a country facilitates equal access to investors across the nation.
National Securities Depository Limited has marked the beginning of the process of dematerialisation of shares of the participating companies.
Securities and Exchange Board of India stands for abolition of Capital issues control and retaining the sale authority for new capital issues
Securities Trading Corporation of India fosters the development of an active secondary market for Government Securities.
Match the items of List-I with the items of List-II and select the correct answer:
List-I
List-II
(i) Private ownership and Free Enterprise
(a) Secondary Market
(ii) Government ownership and Central Authority
(b) Capitalism
(iii) The market for the sale and purchase of previously issued securities
(c) Primary Market
(iv) The market for new long term capital
(d) Socialism
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$$(i) - (b), (ii) - (d), (iii) - (a), (iv) - (c)$$
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$$(i) - (a), (ii) - (b), (iii) - (c), (iv) - (d)$$
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$$(i) - (b), (ii) - (d), (iii) - (c), (iv) - (a)$$
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$$(i) - (a), (ii) - (c), (iii) - (b), (iv) - (d)$$
Which of the following is related to 'BOLT' system in the Indian Securities market?
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National Stock Exchange
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Bombay Stock Exchange
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Over the Counter Exchange of India
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Multi Commodity Stock Exchange
Explanation
The Bombay Online Trading System (BOLT) enabled the oldest stock exchange in India to expand trading activities to 118 cities across the country. BOLT has at present capacity to handle 5,00,000 trades in a seven hour trading session per day.
Match the various stock exchanges in List-I with the years of their establishment in List-II as follows and suggest the correct code:
List-I
List-II
(a) National Stock Exchange (NSE)
(i) $$1875$$
(b) MCX Stock Exchange (MCX-SX)
(ii) $$1992$$
(c) Bombay Stock Exchange (BSE)
(iii) $$1998$$
(d) Interconnected Stock Exchange of India (ISEI)
(iv) $$2008$$
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$$(a) - (ii), (b) - (iv), (c) - (i), (d) - (iii)$$
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$$(a) - (ii), (b) - (iii), (c) - (iv), (d) - (i)$$
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$$(a) - (i), (b) - (iii), (c) - (ii), (d) - (iv)$$
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$$(a) - (iii), (b) - (ii), (c) - (iv), (d) - (i)$$
Explanation
National Stock Exchange (NSE), a leading stock exchange of India, was established in 1992.
The Metropolitan Stock Exchange of India (MSE) (formerly known as MCX Stock Exchange Limited) was recognized by the Securities and Exchange Board of India (SEBI) on 16 September 2008 and is valid till 15 September 2018.
Bombay Stock Exchange (BSE) was established in the year 1875.
Inter-connected Stock Exchange of India Limited (ISE) is a national-level stock exchange, providing trading, clearing, settlement, risk management and surveillance support to its Trading Members. ISE is incorporated as a company limited by guarantee in January - 1998.
Money market arranges for ____________ and capital market provides for ____________ funds.
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long-term, short-term
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long-term, short to medium-term
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short-term, medium to long-term
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medium-term, short to long-term
Explanation
The financial market is a platform where investors deal in financial instruments. Money market and capital market are part of the financial market.
In the money market, extremely liquid financial instruments are traded, i.e. monetary instruments of short expiry are dealt with.
On the the other hand, the capital market is for medium to long term finance.
Choose the incorrect statement about securities.
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In order to use dematerialising facilities one has to open a demat account.
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Change from electronic format to physical form is called re-materialisation.
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Once you dematerialise your securities you cannot rematerialise.
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Change from physical form to electronic format is called dematerialisation.
Explanation
Dematerialisation is the process of converting physical shares into electronic format however, reconversion to physical form or rematerialisation is also possible.
_________
is a measurement of relationship between stock price of any particular stock and the movement of whole market.
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Call Option
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Bids and Offer
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Beta
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Break - even Point
Explanation
Consider A.
Call Option:
As we know that, A call option is a contract between a buyer and a seller to purchase a certain stock at a certain price up until a defined expiration date.
Consider B.
Bid and Offers:
It refers to a way price quotation that indicates the best potential price at which a security can be sold and bought at a given point in time.
Consider C.
Beta:
In finance, the beta is a measure of stock's volatility in relation to the overall market. i.e., Beta is a measure of how an individual asset moves when the overall stock market increases or decreases.
Consider D.
Break even point:
The break-even point is the point at which total cost and total revenue are equal.
So from the above discussion we can say that, Beta is a measurement of relationship between stock price of any particular stock and the movement of whole market.
$$\therefore $$ Option C. Beta Is correct answer.
Accrual bonds are also known as _____________.
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Zero Coupon Bonds
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Fixed interest Bonds
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Flat Rate Bonds
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Low Interest Bonds
Explanation
A zero-coupon bond, also known as an "accrual bond," is a debt security that doesn't pay interest (a coupon) but is traded at a deep discount, rendering profit at maturity when the bond is redeemed for its full face value.
__________ is the allotment of securities by a company to institutional investors and some selected individuals.
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Offer for Sale
0%
Private Placement
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Rights Issue
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E-IPOs
Explanation
Private placement is the allotment of securities by a company to institutional investors and some selected individuals. It helps the company to raise funds for capital more quickly than through a public issue. This method is chosen by the companies that cannot afford to raise capital through a public issue.
The essential function of a _________ market is to facilitate the transfer of investible funds from savers to entrepreneurs or to expand existing ones through the issue of securities for the first time.
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secondary
0%
capital
0%
primary
0%
money
Explanation
The primary market is also known as the new issues market. It deals with new securities being issued for the first time.
The essential function of a primary market is to facilitate the transfer of investible funds from savers to entrepreneurs seeking to establish new enterprises or to expand existing ones through the issue of securities for the first time.
The investors in this market are banks, financial institutions, insurance companies, mutual funds and individuals.
__________ is a privilege given to existing shareholders to subscribe to a new issue of shares according to the terms and conditions of the company.
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E-IPOs
0%
Offer for Sale
0%
Private Placement
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Rights Issue
Explanation
A rights issue is one of the ways by which a listed company raises additional capital for its operations. Difference between rights issue and other share issues is that under rights issue, shares are allotted to the existing shareholders in proportion of their existing shareholding.
Hence rights issue is a privilege given to existing shareholders to subscribe to a new issue of shares according to the terms and conditions of the company.
Which of the following statements is not true with regard to money market?
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The instruments traded are highly liquid.
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Deals in unsecured and short-term debt instruments.
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It is situated at specific locations.
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It involves low market risk.
Explanation
The money market is a market for short term funds which deals in monetary assets whose period of maturity is upto one year. It is a market where low risk, unsecured and short term debt instruments that are highly liquid are issued and actively traded
everyday. It has no physical locations.
Which of the following statements is not true with regard to Treasury bills?
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They are available for a minimum amount of 25,000 and in multiples thereof.
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They carry high risk of default.
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They are highly liquid and have assured yield.
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Are issued in the form of a promissory note.
Explanation
Treasury bills are issued in the form of a promissory note. They are highly liquid and have assured yield and negligible risk of default. They are issued at a price which is lower than their face value and repaid at par. Treasury bills are available for a minimum amount of
` 25,000 and in multiples thereof.
Which of the following statements is not true with regard to Commercial paper?
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It usually has a maturity period of 15 days to one year.
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It is a long-term unsecured promissory note with a fixed maturity period.
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Companies use this instrument for bridge financing.
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It is sold at a discount and redeemed at par.
Explanation
Commercial paper is a short-term unsecured promissory note, negotiable and transferable by endorsement and delivery with a fixed maturity period. It is issued by large and credit worthy companies to raise short-term funds at lower rates of interest than market rates. It usually has a maturity period
of 15 days to one year.
Which of the following is not a regulatory body?
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SIDBI
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SEBI
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RBI
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CCI
Explanation
RBI
:-
RBI is India's central bank and regulatory body under the jurisdiction of ministry of finance.
SEBI
:-
SEBI was first established in $$1988$$ as non-statutory body for regulating the securities market.
CCI
:-
CCI is the sole quasi-judicial and regulatory body established under the competition Act, $$2002$$.
Therefore RBI , CCI , SEBI are regulatory body but SIDBI is not a regulatory body.
Hence, Option A is correct answer.
Controller of Capital Issues was replaced by which of the following Regulatory authority?
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IRDAI
0%
Competition Commission of India (CCI)
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RBI
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SEBI
Explanation
As we know that,
Securities and Exchange Board of India (SEBI) was first established in $$1988$$ as a non-statutory body for regulating the securities market.
It became an autonomous body on $$30$$ January $$1992$$. Controller of capital issues was the regulatory authority before SEBI came into existence. It derived authority from the capital issues (control) Act, $$1947$$.
$$\therefore $$ Option D is correct answer.
Which of the following statements is not true with regard to capital market?
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The funds are raised for a short period of time.
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It is classified into two types.
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Both debt and equity funds can be raised.
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All of the above.
Explanation
Capital Market is a place where long-term funds are mobilised by the corporate undertakings and Government, where both debt and equity are raised and invested. Capital Market can be divided into primary market and secondary market.
Which of the following statements is true with regard to financial markets?
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They link the households which save funds and business firms which invest these funds.
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They allocate funds available for investment into their most productive investment opportunity.
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They work as an intermediary between the savers and the investors by mobilising funds between them.
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All of the above
Explanation
A financial market helps to link the savers and the investors by mobilizing funds between them. In doing so it performs what is known as an allocative function. It allocates or directs funds available for investment into their most productive investment opportunity. The process by which allocation of funds is done is
called financial intermediation.
Which of the following is not a protective function of SEBI ?
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Promotion of fair practices and code of conduct in securities market.
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Regulation of takeover bids by companies.
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Controlling insider trading.
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Prohibition of fraudulent and unfair trade practices.
Explanation
Protective Functions of SEBI includes:
1. Prohibition of fraudulent and unfair
trade practices.
2.
Controlling insider trading
3. Undertaking steps for investor
protection.
4.
Promotion of fair practices and code
of conduct in securities market.
However, regulation of takeover bids by companies is one of the many regulatory functions of SEBI.
SEBI was setup to regulate the ______.
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Insurance market
0%
Security Market
0%
Money market
0%
Capital market
Explanation
Securities and Exchange Board of India (SEBI) was first established in $$1988$$ as a non-statutory body for regulating the securities market.
Therefore, Option B is correct answer.
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