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Financial Markets Test - 18

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Financial Markets Test - 18
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Weekly Quiz Competition
  • Question 1
    1 / -0
    The process by which allocation of funds is done is called ____.
    Solution
    The process by which allocation of funds is done is called financial intermediation. This process helps to channelize funds from the borrowers to lenders. Financial intermediation generally cause reduction in transaction cost. This process is mainly performed by the financial intermediaries, such as stockbroker, commercial bank, investment bank, etc.
  • Question 2
    1 / -0
    Holders of assets can readily sell their financial assets through the mechanism of the financial market. This is because financial markets provide _________.
    Solution
    Holders of assets can readily sell their financial assets through the mechanism of the financial market. This is because financial markets provide liquidity to Financial Assets. Liquidity of financial assets means that financial assets can be converted into cash in a short time, with little or no loss in value.
  • Question 3
    1 / -0
    _______ are issued at a price which is lower than their face value and repaid at par.
    Solution
    Treasury bill are issued at a price which is lower than their face value and repaid at par. A treasury bill is basically an instrument of short-term borrowing by the Government of India maturing in less than one year.  Treasury bills enable government to get short term borrowings as these bills are sold to banks and general public. Maturity of Treasury bills varies from 14 to 364 days.
  • Question 4
    1 / -0
    _______ helps existing investors to dis-invest and fresh investors to enter the market.
    Solution
    Secondary market helps existing investors to dis-invest and fresh investors to enter the market. The secondary market is also known as the stock market or stock exchange, which is the market for the purchase and sale of existing securities. In secondary market, securities are not directly issued by the company to investors. The securities are sold by existing investors to other investors.
  • Question 5
    1 / -0
    The identity of members is trading in NSE is withheld by the National stock exchange. Identify the advantage stated.
    Solution
    The identity of members is trading in NSE is withheld by the National stock exchange. Advantage stated here is confidential trading in NSE. NSE or National Stock Exchange is the leading stock exchange of India. It is situated in Mumbai. NSE maintains the confidential information about trading in order to protect the interests of the investors and provides safety for the investment.
  • Question 6
    1 / -0
    This is where a company gets listed in a stock exchange. Identify the platform _______________.
    Solution
    The company gets listed in a stock exchange on the platform known as the primary market. The primary market is also known as the new issues market, which deals with new securities being issued for the first time.  Primary market directly contributes in capital formation because in primary market company goes directly to investors and utilize the funds for investment purpose.Primary market does not include finance in the form of loan from financial institutions.
  • Question 7
    1 / -0
    _______makes a direct appeal to investors to raise capital, through an advertisement in newspapers and magazines.
    Solution
    Prospectus makes a direct appeal to investors to raise capital, through an advertisement in newspapers and magazines. Prospectus is regarded as a formal document. It is required to be filed with the Securities and Exchange Commission. It helps to provide details about an investment offering for sale to the public.
  • Question 8
    1 / -0
    _______ is a short-term, negotiable, self-liquidating instrument which is used to finance the credit sales of firms.
    Solution
    A commercial bill is a short-term, negotiable, self-liquidating instrument which is used to finance the credit sales of firms. Commercial bills are known as trade bills or accommodation bills. These are common instruments used in credit purchase and sale. These have short term maturity period generally 90 days and can be discounted with bank even before the maturity period.
  • Question 9
    1 / -0
    Some companies cannot afford a public issue and choose to use private placement because ________.
    Solution
    Some companies cannot afford a public issue and choose to use private placement because access to the primary market can be expensive on account of various mandatory and non-mandatory expenses. The process of listing company's shares in stock exchange involves huge expenses.
  • Question 10
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    _____ is a statistical measure of the changes in a portfolio of stocks representing a portion of the overall market.
    Solution
    Index is a statistical measure of the changes in a portfolio of stocks representing a portion of the overall market. Index can be defined as a statistical measure of change in a securities market. In simple terms, index is an measure of something related to finance.
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