Financial market Quiz-1

One of the common irregularities noted by the Securities and Exchange Board of India during the inspection of a stock exchange was that it was dealing with unregistered sub-brokers. Identify the related function of Securities and Exchange Board of India.

• development function

• regulatory function

• protective function

• none of the above

Answer explanation

The Securities and Exchange Board of India performs a regulatory function by identifying common irregularities, such as dealing with unregistered sub-brokers.

Identify the correct sequence of steps to be followed in the trading procedure at the Stock Exchange.

• Opening a trading account and Demat account, Placing an order, Settlement of order, Execution of order

• Settlement of order, Opening a trading account and Demat account, Placing an order, Execution of order

• Opening a trading account and Demat account, Placing an order, Execution of order, Settlement of order

• Placing an order, Opening a trading account and Demat account, Execution of order, Settlement of order

Answer explanation

The correct sequence of steps in the trading procedure at the Stock Exchange is: Opening a trading account and Demat account, Placing an order, Execution of order, Settlement of order.

It serves as an intermediary between the investor and the depository who is authorised to maintain the accounts of dematerialised shares.

• Depository participant

• Depository

• Stock exchange

• None of the above

Answer explanation

Depository participant serves as an intermediary between the investor and the depository, maintaining dematerialized share accounts.

Stock exchanges provide an opportunity for investors to disinvest and invest. Identify the related function of the stock exchange.

• Providing scope for speculation

• Providing liquidity and marketability to existing securities

• Pricing of security

• Spreading of the equity culture

Answer explanation

Stock exchanges provide liquidity and marketability to existing securities, allowing investors to easily buy and sell their investments.

Stock Exchange works as a mechanism for the valuation of securities through the forces of demand and supply. Identify the related function performed by the stock exchanges.

• Providing scope for speculation

• Providing liquidity and marketability to existing securities

• Pricing of security

• Spreading of the equity culture

Answer explanation

Stock exchanges perform the function of pricing securities based on demand and supply forces.

Under this method of floatation in the primary market, a subscription is invited from the general public to invest in the securities of a company through the issue of advertisement.

• Private placement

• Offer through a prospectus

• Offer for sale

• All of the above

Answer explanation

In this method, a company invites the general public to invest in its securities through advertisements. The correct choice is 'Offer through a prospectus'.

A company can raise capital through the primary market in the form of _____.

• Equity shares

• Preference shares

• Debentures

• All of the above

Answer explanation

A company can raise capital through the primary market by issuing equity shares, preference shares, and debentures, which are all options provided in the answer choices.

Who issues a treasury bill?

• Any nationalised bank

• Any private sector bank

• Reserve Bank of India

• All of the above

Answer explanation

A treasury bill is issued by the Reserve Bank of India, making it the correct choice among the options provided.

Which one of the following is not a function of financial market?

• Mobilisation of savings

• Price determination of securities

• Floating of companies

• Lowering transaction cost

Answer explanation

Floating of companies is not a function of financial market. Financial markets facilitate mobilisation of savings, price determination of securities, and lowering transaction costs.

Primary and secondary markets develop simultaneously because they

• complement each other.

• complement with each other

• control each other.

• function independently.

Answer explanation

Primary and secondary markets develop simultaneously because they complement each other.