Financial Markets Class 12 MCQ Questions With Answers
Financial Market MCQ Class 12 Chapter 10 Question 1.
Which of the following statements is false regarding financial market?
(A) Financial markets complicate the purchase and sale of financial assets.
(B) Financial markets provide valuable information about securities being traded in the market.
(C) They provide liquidity to financial assets.
(D) None of the above.
Answer:
(A) Financial markets complicate the purchase and sale of financial assets.
Explanation:
Financial markets facilitate easy purchase and sale of financial assets. In doing so they provide liquidity to financial assets, so that they can be easily converted into cash whenever required. Folders of assets can readily sell their financial assets through the mechanism of the financial market.
Business Studies Chapter 10 MCQ Class 12 Question 2.
The money market is a market for short-term funds which deals in monetary assets whose period of maturity is:
(A) Upto one year
(B) Upto six months
(C) Upto three months
(d) None of these
Answer:
(A) Upto one year
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.
Question 3.
Which of the following money market instrument is also known as Zero Coupon Bonds?
(A) Call Money
(B) Treasury Bill
(C) Commercial Paper
(D) Commercial Bill
Answer:
(B) Treasury Bill
Explanation:
Treasury bill 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.
Question 4
……………… is short-term finance repayable on demand, with a maturity period of one day to fifteen days.
(A) Call Money
(B) Treasury Bill
(C) Commercial Paper
(D) Commercial Bill
Answer:
(A) Call Money
Explanation:
Call money is a short-term finance repayable on demand, with a maturity period of one day to fifteen days, used for inter bank transactions. Commercial banks have to maintain a minimum cash balance known as cash reserve ratio.
Question 5.
Zakira Ltd. wants to invest in treasury bills issued by RBI. What will be the minimum amount to be invested in Treasury Bill?
(A) ₹ 25,000
(B) ₹ 20,000
(C) ₹ 50,000
(D) ₹ 1,00,000
Answer:
(A) ₹ 25,000
Explanation:
Treasury bills are available for a minimum amount of ₹ 25,000 and in multiples thereof.
Question 6.
Mahindra Bank wants short-term finance for only one or two days. What option should it pick?
(A) Treasury bills
(B) Call Money
(C) Commercial Paper
(D) None of the above
Answer:
(B) Call Money
Explanation:
Call money is mainly used by the banks to meet their temporary requirement of cash. They borrow and lend money from each other normally on a daily basis. It is repayable on demand and its maturity period varies between one day to a fortnight.
Question 7.
Aman had 55 shares of Vani Ltd. He wanted to sell 30 shares, so he went for a specific market to sell them through online portal. He went for which of following markets?
(A) Money Market
(B) Secondary Market
(C) Primary Market
(D) None of the above
Answer:
(B) Secondary Market
Explanation:
The secondary market is also known as the stock market or stock exchange, It is a market for the purchase and sale of existing securities. It helps existing investors to disinvest and fresh investors to enter the market.
Question 8.
Which of the following statements is incorrect regarding Financial Markets?
(A) The process by which allocation of funds is done is called financial intermediation.
(B) Money market instruments are close substitutes for money.
(C) The difference between the price at which the treasury bills are issued and their redemption value is the interest receivable on them and is maturity value.
(D) Treasury Bills are issued at a price which is lower than their face value and repaid at par.
Answer:
(C) The difference between the price at which the treasury bills are issued and their redemption value is the interest receivable on them and is maturity value.
Explanation:
The difference between the price at which the treasury bills are issued and their redemption value is the interest receivable on them and is called discount.
Question 9.
Match the FUNCTIONS of Financial Markets in Column I with their correct MEANING in Column II
| Column I | Column II |
| (a) Allocative Function | (i) Establish a price for the financial asset through interaction between house-holds and business firms. |
| (b) Facilitating Price Discovery | (ii) Easy purchase and sale of financial assets. |
| (c) Financial Assets Liquidity | (iii) Mobilization of savings and channelising them into the most productive use. |
(A) (ii), (iii), (i)
(B) (iii), (ii), (i)
(C) (ii), (i), (iii)
(D) (iii), (i), (ii)
Answer:
(D) (iii), (i), (ii)
Question 10.
Which of the following is a function of the stock exchange?
(A) Providing liquidity and marketability to existing securities
(B) Spreading of equity cult
(C) Contributing to economic growth
(D) All of the above
Answer:
(D) All of the above
Explanation:
Stock Exchange provides both liquidity and easy marketability to already existing securities in the market. In stock exchange securities of various companies are bought and sold. This process of disinvestment and reinvestment helps to invest in most productive investment proposal and this leads to capital formation and economic growth.
Question 11.
The organisation/institution which provides scope for speculation is:
(A) Stock exchange
(B) SEBI
(C) Brokers
(D) None of the above
Answer:
(A) Stock exchange
Explanation:
The stock exchange provides sufficient scope within the provisions of law for speculative activity in a restricted and controlled manner. It is generally accepted that a certain degree of healthy speculation is necessary to ensure’ liquidity and price continuity in the stock market.
Question 12.
………….. is an institution or organisation, which holds securities in electronic form, in which trading is done.
(A) Stock Exchange
(B) SEBI
(C) Depository
(D) None of the above
Answer:
(C) Depository
Explanation:
Just like a bank keeps money in safe custody for customers, a depository is also like a bank and keeps securities in electronic form on behalf of the investor. It is a technology driven electronic storage system. It has no paper work relating to share certificates, transfer, forms, etc.
Question 13.
Which of the following can be a depository participant (DP)?
(A) Bank
(B) Broker
(C) Financial Services Company
(D) All of the above
Answer:
(D) All of the above
Explanation:
A depository participant (DP), can be either a bank, broker, or financial services company. Depository Participant (DP) is an agent of the depository. Investors interact only f with DR Any financial institution can become DP after registration with SEBI. The company whose shares are to be transacted in lectronic form must be registered with a depository.
Question 14.
It has been made compulsory to settle all trades within how many days of the trade date on a rolling settlement basis?
(A) One
(B) Two
(C) Three
(D) Four
Answer:
(B) Two
Explanation:
Cash is paid or securities are delivered on pay-in day, which is before the T+2 day as the deal has to be settled and finalised on the T+2 day. The settlement cycle is on T+2 day on a rolling settlement basis.
Question 15.
Hemu’s mother gifted her shares of a large IT company. The securities were in physical form. She has a bank account but does not possess any other forms of security. She wanted to sell the shares and approached a registered broker. Which of the following is a mandatory detail which she needs to provide the broker?
(A) Permanent Account Number
(B) Educational qualification and occupation.
(C) Residential status
(D) None of the above
Answer:
(A) Permanent Account Number
Explanation:
If an investor wishes to buy or sell any security he has to first approach a registered broker or sub-broker and enter into an agreement with him. The investor has to sign a broker-client agreement and a client registration form before placing an order to buy or sell securities and also has to provide certain other details and information such as PAN number.
Question 16.
………….. is a legally enforceable document and helps to settle disputes claims between the investor and the broker. It contains details of the number of shares bought or sold, the price, the date and time of deal, and the brokerage charges.
(A) Share
(B) Contract Note
(C) Registration Form
(D) None of these
Answer:
(B) Contract Note
Explanation:
Contract note contains details of the number of shares bought or sold, the price, the date and time of deal, and the brokerage charges. This is an important document as it is legally enforceable and helps to settle disputes claims between the investor and the broker.
Question 17.
NSE and BSE are types of………….. .
(A) Depositories
(B) Depository Participants
(C) Stock Exchanges
(D) Banks
Answer:
(C) Stock Exchanges
Explanation:
BSE is type of stock exchange which provides an efficient and transparent market for trading in equity, debt instruments, derivatives, and mutual funds. NSE is also a stock exchange that establishes a nationwide trading facility for all types of securities.
Question 18.
Match the STEPS for screen-based trading for buying and selling of securities by an investor in Column I with their correct EXPLANATION in Column II.
| Column I | Column II |
| (a) One | (i) Open a demat account |
| (b) Two | (ii) Place an order with the broker to buy or sell shares |
| (c) Three | (iii) Enter into an agreement with a registered broker or sub-broker |
| (d) Four | (iv) Provide necessary details and information |
(A) (i), (iii), (iv), (ii)
(B) (iii), (iv), (i), (ii)
(C) (iv), (ii), (i), (iii)
(D) (iii), (i), (ii), (iv)
Answer:
(B) (iii), (iv), (i), (ii)
Question 19.
Which of the following stands for SEBI?
(A) Stock and Exchange Board of India
(B) Securities and Exchange Board of India
(C) Securities and Exchange Bank of India
(D) Stock and Exchange Bank of India
Answer:
(B) Securities and Exchange Board of India
Explanation:
SEBI stands for Securities and Exchange Board of India. SEBI regulates how the stock market and mutual funds function.
Question 20.
Which of the following is are the ‘Developmental Functions’ of Securities and Exchange Board of India?
(A) It trains the intermediaries of securities market
(B) It conducts research and publishes information useful to all market participants
(C) It undertakes measures to develop the capital markets by adapting a flexible approach.
(D) All of the above
Answer:
(D) All of the above
Explanation:
Developmental functionrefers to the steps taken by SEBI in order to provide the investors with a knowledge of f the trading and market function. It includes training of intermediaries who are a part of the security market, introduction of trading through electronic means and by making the underwriting an optional system in order to reduce cost of issue.
Question 21.
Rishu’s friend Devina works as a Finance Manager in Perfect Solutions Ltd. Devina in a meeting with the directors of the company came to know that the firm would soon be declaring a bonus issue which would lead to an increase in the price of shares. On this basis, Devina advised Rishu to purchase the shares of Perfect Solutions Ltd., who thus bought the shares. SEBI can control malpractices like these through which of the following functions:
(A) Protective functions
(B) Regulatory functions
(C) Development functions
(D) All of the above
Answer:
(A) Protective functions
Explanation:
The protective function implies the role that SEBI plays in protecting the investor interest and also that of other financial participants. Prohibition of fraudulent and unfair trade practices like making misleading statements, manipulations, price rigging, etc. is the function of SEBI.
Question 22.
Which is the apex statutory body of capital market to which customers can complain to redress their grievances ?
(A) SEBI
(B) CDSL
(C) NSE
(D) BSE
Answer:
(A) SEBI
Explanation:
SEBI was established to protect the interest of people in the stock market and provide a healthy environment for them. It is the supreme statutory body of capital market to which customers can complain to redress their grievances.
Question 23.
The basic purpose of SEBI is to create an environment to facilitate efficient mobilisation and allocation of resources through the securities markets. Who are the constituents of this market for whom SEBI aims at creating a conducive environment?
(A) Issuers of securities
(B) Investors
(C) Market intermediaries
(D)All of the above
Answer:
(D)All of the above
Explanation:
The basic purpose of SEBI is to create an environment to facilitate efficient mobil is ationandal location of resources through the securities markets. This environment aims at meeting the needs of the three groups which basically constitute the market, viz, the issuers of securities (companies), the investors and the market intermediaries
Question 24.
Which of the following is not a Protective Function performed by SEBI?
(A) Prohibition of fraudulent and unfair trade practices.
(B) Conducting research and publishing information useful to all market participants.
(C) Undertaking steps for investor protection.
(D) Promoting fair practices and code of conduct in securities market.
Answer:
(B) Conducting research and publishing information useful to all market participants.
Explanation:
Conducting research and publishing information useful to all market participants is the development function of SEBI. Developmental function refers to the steps taken by SEBI in order to provide the investors with a knowledge of the trading and market function.
Question 25.
The Securities and Exchange Board of India was established by the Government of India and was given a statutory status in…………
(A) 1988
(B) 1992
(C) 1996
(D) 1998
Answer:
(B) 1992
Explanation:
The Securities and Exchange Board of India was established by the Government of India on 12 April, 1988 as an interim administrative body to promote orderly and healthy growth of securities market and for investor protection. It was f to function under the overall administrative control of the Ministry of Finance of the Government of India. The SEBI was given a statutory status on 30 January, 1992 through an ordinance.
Question 26.
Match the FUNCTIONS of SEBI in Column I with the respective EXPLANATION in Column II:
| Column I | Column II |
| (a) Protective | (i) Training of intermediaries of the securities market. |
| (b) Regulatory | (ii) Prohibition of fraudulent and unfair trade practices. |
| (c) Development | (iii) Registration of brokers, sub-brokers and other players of market. |
(A) (iii), (i), (ii)
(B) (i), (ii), (iii)
(C) (ii), (iii), (i)
(D) (iii), (ii), (i)
Answer:
(C) (ii), (iii), (i)
Assertion and Reason Based MCQs
Directions: In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:
(A) Both (A) and (R) are true, and (R) is the correct explanation of (A).
(B) Both (A) and (R) are true, but (R) is not the correct explanation of (A).
(C) (A) is true, but (R) is false.
(D) (A) is false, but (R) is true.
Question 1.
Assertion (A): Certificates of Deposit (CD) are secured, negotiable, long-term instruments in bearer form.
Reason (R): A rise in call money rates makes other sources of finance such as commercial paper and certificates of deposit cheaper in comparison as banks raise funds from these sources.
Answer:
(D) (A) is false, but (R) is true.
Explanation:
Certificates of Deposit (CD) are unsecured, negotiable, short-term instruments in bearer form, issued by commercial banks and development financial institutions.
Question 2.
Assertion (A): A commercial bill is a bill of exchange used to finance the working capital requirements of business firms.
Reason (R): Commercial bill is a short-term, negotiable, self-liquidating instrument which is used to finance the credit sales of firms.
Answer:
(B) Both (A) and (R) are true, but (R) is not the correct explanation of (A).
Explanation:
Commercial bills are basically negotiable instruments accepted by buyers for goods or services obtained by them on credit, Such bills being bills of exchange can be kept upto the due date and encashed by the seller or may be endorsed to a third party in payment of dues owing to the latter.
Question 3.
Assertion (A): The primary market is also known as the new issues market.
Reason (R): It deals with new securities being issued for the first time.
Explanation:
The primary market is a type of capital market that deals with the new issue of stocks and securities. The investors in this market are banks, financial institutions, insurance companies, mutual funds and individuals.
Question 4.
Assertion (A): An ideal capital market is one where finance is available at reasonable cost.
Reason (R): Capital market is a market where low risk, unsecured and short-term debt instruments that are highly liquid are issued and actively traded everyday.
Answer:
(C) (A) is true, but (R) is false.
Explanation:
The money market is a market for short-term funds which deals in monetary assets. It is a market where low risk, unsecured and short-term debt instruments that are highly liquid are issued and actively traded everyday.
Question 5.
Assertion (A): Stock exchange contributes to economic growth.
Reason (R): Through the process of disinvestment and reinvestment savings get channelised into their most productive investment avenues.
Answer:
(A) Both (A) and (R) are true, and (R) is the correct explanation of (A).
Explanation:
Stock exchange offers a platform for trading of securities of the various companies. This process of trading involves continuous disinvestment and reinvestment, which offers opportunities for capital formation and subsequently, growth of the economy.
Question 6.
Assertion (A): Stock exchange is an unorganised market.
Reason (R): Stock exchange makes complete information available to public in regard to prices and volume of transactions taking place every day.
Answer:
(D) (A) is false, but (R) is true.
Explanation:
A stock exchange is generally organised as an association, a society or a company with a limited number of members.
It is open only to these members who act as brokers for the buyers and sellers.
Question 7.
Assertion (A): Stock exchange provides safety to dealings and investment.
Reason (R): Transactions on the stock exchange are conducted only amongst its members with adequate transparency.
Answer:
(A) Both (A) and (R) are true, and (R) is the correct explanation of (A).
Explanation:
Stock exchange provides safety, security and equity in dealings as transactions are conducted as per well defined rules and regulations. Transactions on the stock exchange are conducted in strict conformity to its rules and regulations which include the procedure and timings of delivery and payment to be followed.
Question 8.
Assertion (A): Demat account refers to an account which an Indian citizen must open with the DPs to trade in listed securities in electronic form.
Reason (R): Depository is like a bank in which an investor can deposit and withdraw his shares.
Answer:
(B) Both (A) and (R) are true, but (R) is not the correct explanation of (A).
Explanation:
Investors who want to get securities in electronic form opens a Demat Account. From this account one can hold shares of various companies in the dematerialised electronic form.
Question 9.
Assertion (A): Government of India decided to set-up a separate regulatory body known as Securities and Exchange Board of India.
Reason (R): SEBI was set up to prevent trading malpractices and achieve a balance between self regulation by the securities industry and its statutory regulation.
Answer:
(A) Both (A) and (R) are true, and (R) is the correct explanation of (A).
Explanation:
Many malpractices started taking place such as rigging of prices, non-adherence of provisions of the Companies Act, violation of rules and regulations of stock exchanges etc. Due to these malpractices, people started losing confidence in the stock market. The government felt a sudden need to set up an authority to regulate the working and reduce these malpractices. As a result, the Government came up with the establishment of SEBI.
Question 10.
Assertion (A): Controlling insider trading and imposing penalties for such practices is a protective function of SEBI.
Reason (R): Registration of collective investment schemes and Mutual Funds is a development function of SEBI.
Answer:
(C) (A) is true, but (R) is false.
Explanation:
Registration of collective investment schemes and Mutual Funds is a regulatory function of SEBI. Regulatory functions involve establishment of rules and regulations for the financial intermediaries along with corporates that helps in efficient management of the market.
Question 11.
Assertion (A): The objective of SEBI is to maintain a balance between statutory regulations and self regulation.
Reason (R): The objective of the Primary Market Advisory Committee is to advise SEBI on issues related to the development of primary market in India.
Answer:
(B) Both (A) and (R) are true, but (R) is not the correct explanation of (A).
Explanation:
The SEBI has formed two advisory committees. They are the Primary Market Advisory Committee and the Secondary Market Advisory Committee. The objectives of these two committees is to advise SEBI on issues related to the development of primary market in India.
Case-Based MCQs
I. Read the following text and answer the questions given below:
ISQAA SOLAR Limited is searching for options to raise ₹ 20,000 crores from the primary market for diversification and modernisation of existing projects. It hired the services of a renowned financial consultancy firm, DHAN LAXMI PVT. LTD. to suggest options for the same. DHAN LAXMI PVT. LTD. suggested a list of options to the Board of Directors of the company. It was decided that for the immediate requirement of ₹ 1,500 crores, the company will give a privilege to existing shareholders to subscribe to a new issue of shares according to the terms and conditions of the company.
₹ 4,500 crores would be raised by allotment of securities to a consortium of financial institutions, instead of inviting subscription from the public by making a direct appeal to investors to raise capital. It was further decided to raise capital to the tune of ₹ 6,000 crores through an issuing house. All these options were accepted by the Board of Directors. The Board further decided to raise₹ 8,000 crores through the online system of the stock exchange by entering into an agreement with the exchange.
Question 1.
Identify the method of floatation of new issues in the primary market, not taken up by ISQAA SOLAR LTD.
(A) Offer for sale
(B) Rights issue
(C) E-IPO
(D) Offer through prospectus
Answer:
(D) Offer through prospectus
Explanation:
Offer through prospectus involves inviting subscription from the public through issue of prospectus.
Question 2.
” ₹4,500 crores would be raised by allotment of securities to a consortium of financial institutions, instead of inviting subscription from the public by making a direct appeal to investors to raise capital.” Identify the method of floatation of new issues in the primary market being discussed above, which the company has decided to use :
(A) Offer for sale
(B) Private placement
(C) Right issue
(D) Offer through prospectus
Answer:
(B) Private placement
Explanation:
Private placement is the allotment of securities by a company to institutional investors and some selected individuals. It helps to raise capital more quickly than a public issue.
Question 3.
Identify the reason which has made the firm raise funds from the institutional investors:
(A) It helps to raise funds quickly.
(B) It is not expensive.
(C) Both (A) and (B).
(D) None of the above.
Answer:
(C) Both (A) and (B).
Question 4.
How much money was raised by the company through E-IPO’s?
(A) ₹ 8,000 crores
(B) ₹ 4,500 crores
(C) ₹20,000 crores
(D)₹ 6,000 crores
Answer:
(A) ₹ 8,000 crores
Case-Based MCQs
I. Read the following text and answer the questions given below:
Rajesh is the CEO of a leading petrochemical company. Recently, the company issued share capital to cover some expenses. However, in order to meet the floating cost of issuing shares, the company decided to conduct Bridge Financing. Therefore, it decided to issue a money market tool. The CEO’s decision wisely met the company’s requirements. Three months later, the company decided to issue new shares in the primary market again.
According to the floating method it involves, it decided to adopt the method mainly adopted by listed companies and attract the masses by directly contacting the public. Again, success came from the company’s approach and the realization of its goals. However, when the company tried the same type again three months later, the company encountered many problems. The problem is to determine a key aspect related to the security of the new release. If the same process is carried out in the secondary market, the company will not care too much about this key aspect.
Question 1.
Which type of money market instrument was issued by the company in the earlier part ?
(A) Call money
(B) Treasury bill
(C) Commercial paper
(D) Certificate of deposit
Answer:
(C) Commercial paper
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 creditworthy companies to raise short-term funds at lower rates of interest than market rates.
Question 2.
Which method of floatation was adopted by the company three months later ?
(A) E-IPOs
(B) Offer through prospectus
(C) Right issue
(D) Offer for sale
Answer:
(B) Offer through prospectus
Question 3.
When the company repeated the same process again after three months, it faced problem in:
(A) Primary market
(B) Money market
(C) Commodity market
(D)None of the above
Answer:
(A) Primary market
Question 4.
What key aspect the company would not have cared about in the secondary market ?
(A) Pricing of securities
(B) Regulations from the government
(C) Safety of investor’s money
(D) None of the above
Answer:
(A) Pricing of securities
II. Read the following text and answer the questions given below:
“Usually, money market funds are recommended to investors with an investment horizon of 90-365 days. These schemes can help you diversify your portfolio and help invest surplus cash while maintaining liquidity. It is a good option for retail investors with smaller investment amounts. Ensure that you invest according to your investment plan.”After reading this article in a magazine, Ramesh who needs funds for his venture decided to buy a financial asset from the RBI.
This financial asset is an instrument of short-term borrowing. He decided to buy it because he doesn’t want to take risk and wants an assured return. This instrument is a promissory note. It is highly liquid. This instrument is also known as Zero Coupon Bond. On this instrument is written T-91. Investment in this instrument started with just ₹ 25,000. For a higher value it is given in the multiples of ₹ 25,000.
Question 1.
Which financial asset is indicated in the above case?
(A) Treasury Bill
(B) Commercial Paper
(C) Commercial Bill
(D) Call Money
Answer:
(A) Treasury Bill
Explanation:
A Treasury bill is basically an instrument of short-term borrowing by the Government of India maturing in less than one year. Treasury bills are issued in the form of a promissory note. They are highly liquid and have assured yield and negligible risk of default.
Question 2.
On whose behalf does the RBI issue this instrument?
(A) Government of India
(A) Government of India
(B) Financial Institutions
(C) Banks
(D) Private Companies
Answer:
(A) Government of India
Question 3.
What does T-91 denote here?
(A) Investing period
(B) Receiving period
(C) Conversion period
(D) Maturity period
Answer:
(D) Maturity period
Question 4.
What is the minimum amount for which this instrument is available?
(A) ₹ 25,000
(B) ₹ 50,000
(C) ₹ 1,00,000
(D) ₹ 1,50,000
Answer:
(A) ₹ 25,000
III. Read the following text and answer the questions given below:
“Unicon Securities Pvt. Ltd.” was established to deal in securities. It was registered as a stockbroker with National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) to trade in securities listed at these exchanges. It is also a depository participant with CDSL and NSDL. In the first three years, it developed its business successfully. After that, the composition of Board of Directors changed. Some customers complained to the customer care centre of the company that shares purchased by them and for which the payment has been duly made, were not transferred to their Demat Accounts by “Unicon Securities Pvt. Ltd.”. The executive of customer care centre promised the aggrieved customers that their shares will be transferred to their respective Demat Accounts very soon. But the company delayed the matter and didn’t transfer the shares of the customers to their Demat Accounts. This eroded investors confidence and multiplied their grievances. On regular inspection and by conducting enquiries of the brokers involved, the Securities and Exchange Board of India (SEBI) was able to detect this irregularity.
Question 1.
Identify the step of trading procedure in a stock exchange which has not been followed by “Unicon Securities Pvt. Ltd.”.
(B) Placing the order
(C) Executing the order
(D) Settlement
Answer:
(D) Settlement
Question 2.
Which apex statutory body of capital market inspected and conducted enquiries in order to detect irregularities?
(A) NSE
(B) BSE
(C) Unicon Securities Pvt. Ltd.
(D) SEBI
Answer:
(D) SEBI
Question 3.
By not converting and transferring the shares to the investors Demat Account, i.e., electronic form, which process was not followed?
(A) Dematerialisation
(B) Settlement
(C) Registration
(D) Rematerialisation
Answer:
(A) Dematerialisation
Question 4.
Identify the function of SEBI being stated in paragraph.
(A) Development
(B) Protective
(C) Regulatory
(D) None of the above
Answer:
(C) Regulatory
Explanation:
Regulatory functions involve establishment of rules and regulations for the financial intermediaries along with corporate that helps in efficient management of the market- S
IV. Read the following text and answer the questions given below:
Rajni Auto Manufacturers has been into business for the last 30 years and have decided to give a special privilege to their existing shareholders to subscribe to the new issue of shares where they will be given shares according to the proportion of shares held by them. The company always gives special treatment to its loyal stakeholders and also ensures that they remain associated with the organization for longer durations. Last year, the company was successfully dealing through the capital market where both the buying and selling of securities were taking place. The owner of the company is a man of ethical business. He often contributes to business magazines by writing articles and editorials. He recently wrote an article about the watchdog of stock market. The article gained a lot of popularity and now is part of the curriculum of MBA students.
Question 1.
Which method of floatation was used by Rajni Auto Manufacturers?
(A) Right issue
(B) Private placement
(C) Offer for sale
(D) E-IPOs
Explanation:
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. The shareholders are offered the ‘right’ to buy new shares in 1 proportion to the number of shares they already possess.
Question 2
Which type of capital market was this company dealing in?
(A) Primary market
(B) Secondary market
(C) Commodity market
(D) None of these
Answer:
(B) Secondary market
Explanation:
The secondary market is also known as the stock market or stock exchange. It is a market for the purchase and sale of existing securities. It helps existing investors to disinvest and fresh investors to enter the market. It also provides liquidity and marketability to existing securities.
Question 3.
Which watchdog of the capital market has been referred to in the above case?
(A) Capital market
(B) Stock market
(C) SEBI
(D) Broker
Answer:
(C) SEBI
Question 4.
Identify regulatory functions of the organization identified above?
(A) Pricing of securities
(B) Spreading of equity cult
(C) Registration of brokers and sub-brokers
(D) Promotion of ethical and fair practices
Answer:
(C) Registration of brokers and sub-brokers