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Tuesday, February 12, 2019

Business Finance Multiple Choice Questions - Financial Markets

Unit – X: Financial Markets
1. What is a financial market? Mention its components.
Ans: It refers to the market which creates and exchanges financial assets. It is divided into two parts: Money market and capital market.

2. What are financial assets?
Ans: It refers to the financial instruments or securities. For e.g. shares, debentures, treasury bills, commercial paper etc.
3. What is floatation cost?
Ans: The expenditure incurred in issuing the securities is called floatation cost.
4. Mention two methods of floating securities by a company.
Ans: Initial Public offer, Books building method
5. What are the components of capital market?
Ans: Primary market or New issue market and Secondary Market and Stock exchange.
6. Name the market where new securities are issued for the first time.
Ans: Primary Market or new issue market
7. Name the market which facilitates purchases and sale of old or existing securities.
Ans: Secondary Market or stock exchange
8. What is a zero coupon bond?
Ans: It is a financial instrument for which no interest is paid but is issued at a discount redeemable at par.
9. What type of trade-off function is performed by the money market?
Ans: The money market establishes a balance between short term financial supply and short term financial demand.
10. Name the instruments that are traded in money market.                      2013
Ans: Call money, Commercial Papers, Certificates of deposits, Bills of exchange.
11. Name the instruments that are traded in capital market.
Ans: Stocks, Shares, Debentures, Bonds, GDR (Global Depository receipts)
12. Name the institutions operating in the money market.
Ans: Central Bank, Commercial banks, Non-bank financial institutions.
13. Name the institutions operating in the capital market.
Ans: IDBI, IFCI, ICICI, Stock exchanges.
14. In which year NSEI, BSE and OTCEI were established?                            2015, 2018
Ans: NSEI – In 1991 and BSE – In 1875. But, NSEI was recognized in 1992. OTCEI was established in 1990.
15. With which stock exchanges the Benchmark ‘Sensex’ and ‘nifty’ are associated?
Ans: Bombay stock exchange – Sensex, National Stock exchange - nifty
16. Which is the oldest stock exchange in India?
Ans: Bombay stock exchange
17. Mention the statutory body for regulation of stock exchanges in India.
Ans: SEBI (Securities and Exchange Board of India)
18. When was SEBI established?                                              2017
Ans: It was established in 1988 but was given statutory status in 1992.
19. State the segments of NSEI.
Ans: a) Wholesale debt market b) Capital market segment
20. State one development function of SEBI
Ans: to carry out research work.
21. Money market is a market for short terms funds i.e. for one year and capital market is a market for long term funds i.e. for more than one year.
Ans: Given statement is true.
22. What are various types of operators in stock exchange?
Ans: Brokers, jobbers, bulls, bears and stag.
23. Write the full form of NSEI, BSE and OTCEI.
Ans: NSEI – National stock exchange of India (Nifty), BSE – Bombay Stock Exchange (Sensex), OTCEI – Over the Counter Exchange of India.
24. State two promoters of NSEI.
Ans: a) Industrial development bank of India (IDBI) b) Life insurance corporation of India (LIC)
25. How many stock exchanges are there in India?
Ans: There are 24 recognised stock exchanges in India. Whereas at national level there are two major stock exchange. These are: a) NSEI and b) OTCEI.
26. Name two advisory committees set up by SEBI.
Ans: a) Primary market Advisory committee. b) Secondary market advisory committee.
27. Mention some specific features of Treasury bills.
Ans: Treasury bill: It is also known as zero coupon bonds as no interest is paid.
28. Name two buyers of Commercial paper.
Ans: a) Banks b) Insurance companies.
29. What is meant by “Near Money?”
Ans: All very short term securities are called near money for e.g. marketable securities.
30. What is price rigging?
Ans: It refers to the manipulation of prices of the securities by agents/company for their own profits.
31. On what lines was OTCEI started?
Ans: It was started on the lines of NASDAQ (National Association of securities Dealers Automated Quotation)
32. Name the system where there is electronic book entry form of holding and transferring the securities.
Ans: Dematerialisation.
33. What is ‘Demutualisation of securities?’
Ans: It separates the ownership and control of stock exchanges from trading rights.

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