Financial Markets Test

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Financial Markets Test - 26

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Weekly Quiz Competition

Question 1
1 / -0

Which of the following statements is not true with regard to Treasury bills?

A
They are available for a minimum amount of 25,000 and in multiples thereof.

B
They carry high risk of default.

C
They are highly liquid and have assured yield.

D
Are issued in the form of a promissory note.

Solution

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.
Question 2
1 / -0

Which of the following statements is not true with regard to Commercial paper?

A
It usually has a maturity period of 15 days to one year.

B
It is a long-term unsecured promissory note with a fixed maturity period.

C
Companies use this instrument for bridge financing.

D
It is sold at a discount and redeemed at par.

Solution

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.
Question 3
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SEBI was setup to regulate the ______.

A
Insurance market

B
Security Market

C
Money market

D
Capital market

Solution

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.
Question 4
1 / -0

Which of the following is not a protective function of SEBI ?

A
Promotion of fair practices and code of conduct in securities market.

B
Regulation of takeover bids by companies.

C
Controlling insider trading.

D
Prohibition of fraudulent and unfair trade practices.

Solution

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.
Question 5
1 / -0

Controller of Capital Issues was replaced by which of the following Regulatory authority?

A
IRDAI

B
Competition Commission of India (CCI)

C
RBI

D
SEBI

Solution

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.
Question 6
1 / -0

Which of the following is not a regulatory body?

A
SIDBI

B
SEBI

C
RBI

D
CCI

Solution

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.
Question 7
1 / -0

Which of the following statements is not true with regard to capital market?

A
The funds are raised for a short period of time.

B
It is classified into two types.

C
Both debt and equity funds can be raised.

D
All of the above.

Solution

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.
Question 8
1 / -0

Which of the following statements is true with regard to financial markets?

A
They link the households which save funds and business firms which invest these funds.

B
They allocate funds available for investment into their most productive investment opportunity.

C
They work as an intermediary between the savers and the investors by mobilising funds between them.

D
All of the above

Solution

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.
Question 9
1 / -0

Which of the following statements is not true with regard to Call money?

A
It is used for inter-bank transactions.

B
There is a direct relationship between call rates and other short-term money market instruments.

C
Its maturity period ranges from one day to fifteen days.

D
It is short-term finance repayable on demand.

Solution

Call money is short term finance repayable on demand, with a maturity period of one day to fifteen days, used for inter-bank transactions. The interest rate paid on call money loans is known as the call rate. There is an inverse relationship between call rates and other short-term money market instruments
Question 10
1 / -0

is a method by which banks borrow from each other to be able to maintain the cash reserve ratio.

A
Call money

B
Commercial bill

C
Commercial paper

D
None of the above

Solution

Call money is a method by which banks borrow from each other to be able to maintain the cash reserve ratio. The interest rate paid on call money loans is known as the call rate. It is a highly volatile rate.

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Financial Markets Test - 26

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Financial Markets Test - 26

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Question 1

They are available for a minimum amount of 25,000 and in multiples thereof.

They carry high risk of default.

They are highly liquid and have assured yield.

Are issued in the form of a promissory note.

Solution

Question 2

It usually has a maturity period of 15 days to one year.

It is a long-term unsecured promissory note with a fixed maturity period.

Companies use this instrument for bridge financing.

It is sold at a discount and redeemed at par.

Solution

Question 3

Insurance market

Security Market

Money market

Capital market

Solution

Question 4

Promotion of fair practices and code of conduct in securities market.

Regulation of takeover bids by companies.

Controlling insider trading.

Prohibition of fraudulent and unfair trade practices.

Solution

Question 5

IRDAI

Competition Commission of India (CCI)

RBI

SEBI

Solution

Question 6

SIDBI

SEBI

RBI

CCI

Solution

Question 7

The funds are raised for a short period of time.

It is classified into two types.

Both debt and equity funds can be raised.

All of the above.

Solution

Question 8

They link the households which save funds and business firms which invest these funds.

They allocate funds available for investment into their most productive investment opportunity.

They work as an intermediary between the savers and the investors by mobilising funds between them.

All of the above

Solution

Question 9

It is used for inter-bank transactions.

There is a direct relationship between call rates and other short-term money market instruments.

Its maturity period ranges from one day to fifteen days.

It is short-term finance repayable on demand.

Solution

Question 10

Call money

Commercial bill

Commercial paper

None of the above

Solution

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