Friday 10 July 2015

CBSE Class 12: Business Studies - CH10 - Financial Markets (Very Short Q and Answers)

Financial Markets

Very Short Q & A based on NCERT Chapter.

CBSE Class 12: Business Studies - CH10 - Financial Markets (Very Short Q and Answers)

Q1: What is a financial market?

Answer: A financial market is a market for the creation and exchange of financial assets.

Q2: Does Financial contribute in any development?

Answer: Financial markets contribute to economic development.

Q3: Name the two major components of a financial market.

Answer: Money Market and Capital Market

Q4: What are financial assets?

Answer: Financial instruments or securities like shares, debentures, treasury bills etc. are considered to be financial assets.

Q5: What is a money market?

Answer: A money market refers to the market where borrowers and lenders exchange short-term funds to solve their liquidity needs.

Q6: Define flotation cost.

Answer: Expenditure incurred in issuing securities is called flotation cost. Examples are underwriting commission, advertising etc.

Q7: List three advantages of money market instruments.

   i.   low default risk.
   ii.  maturity under one year
   iii. high marketability

Q8: What is zero coupon bond?

Answer: It refers to a financial instrument for which no interest is paid but is issued at a discount redeemable at par. It is a treasury bill, an instrument of short-term borrowing by the Government of India maturing in less than one year.

Q9: What is a capital market?

Answer: It refers to a market for financial investments which are direct or indirect claims to capital. It is a place where long-term funds are mobilised by the corporate undertakings and Government.

Q10: Which is referred as barometer of economy.

Answer: Capital market particularly stock exchange.

Q11: Ramesh's company has paid up capital of Rs 50,000. He wants to list his company in National Stock Exchange. Can he do so?

Answer: No. Because to get listed in NSE, the minimum paid up capital required is Rs. 3 crores.

Q12: Name the two componenets of capital market.

Answer: Primary market and secondary market.

Q13: List any three major objectives of capital market.

   i.   Mobilize resources for investments
   ii.  Facilitate process of efficient price discovery.
   iii. Facilitate buying and selling of securities.

Q14: List two buyers of commercial paper.

Answer: Banks and Insurance companies.

Q15: What is a commercial paper?

Answer: It is a short-term unsecured promissory note, negotiable and transferable by endorsement and delivery with a fixed maturity period.

Q16: What do you mean by Certificate of Deposit (CD)?

Answer: It is a unsecured, negotiable short-term instruments in bearer form, issued by commercial banks and development financial institutions.

Q17: Name two advisory committees set up by SEBI.

 i.  Primary market Advisory committee.
 ii. Secondary market advisory committee.

Q18: What is price rigging?

Answer: It is the manipulation of prices of the securities by companies or their agents for their own profits.

Q19: Why secondary market is considered as market for second hand securities?

Answer: It is because in this market existing and second hand securities are sold among investors.

Q20: Name the system where there is electronic book entry form of holding and transferring the securities. 

Answer: Dematerialisation.

Q21: What is the Benchmark index of NSE?

Answer: NIFTY (Stock market Index of NSE)

Q22: List the segments of NSEI.

Answer: Wholesale debt market and Capital market segment

Q23: List any three major initiatives taken up by SEBI.

   i.   Control over issue of capital
   ii.  Depositories Act
   iii. Establishment of Regulator

Q24: Name the two depositories operating in India.

Answer: (a) National Securities Depositories Limited (NSDL) and (b) Central Depository Services Limited (CDSL)

Q25: What does NASDAQ stand for?

Answer: It stands for (National Association of Securities Dealers Automated Quotations) the OTC exchange in USA.

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