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Capital Markets — UPSC Prelims Economy previous year questions

80 solved previous year questions on Capital Markets, papers from 2003 to 2022, drawn from UPSC CSE Prelims, UPSC CDS, State PCS. Each carries the printed answer key and the explanation from the source compilation.

1. #1State PCS 2008
   It will be true to classify India as
   • AA food-deficit economy
   • BA labour-surplus economy
   • CA trade-surplus economy
   • DA capital-surplus economy
   Answer: (B) A labour-surplus economy
   Explanation

   Option b is the correct India, labor refers to employment within the As of 2023, the total number of workers in India to be 523.8 million, making it the force in the world, after China (733.5 million) sector still accounts for th e largest share labor force, at followed by the services sector and the industry sector at However, the the labor force in agriculture has been declining in while the share of the labor force in the services been increasing

2. #2UPSC CDS 2016
   Which one of the following statements is correct with respect to the composition of national income in India?
   • AThe share of manufacturing sector has declined
   • BThe share of services sector has increased sharply
   • CThe share of agriculture has remained static
   • DThe share of services sector has declined.- () s
   Answer: (B) The share of services sector has increased sharply
   Explanation

   Option b is the correct deposits are deposits that have a fixed maturity cannot be withdrawn before that without a deposits include fixed deposits, recurring of deposit, etc. Time deposits are the component of the liabilities of commercial India, because they constitute the largest share of deposits of SCBs. As per the latest data available, accounted for 87.4 per cent of the total SCBs as on March 31, 2021

3. #3UPSC CDS 2016
   Which of the following is/are of 'Near Money'? 1. Treasury Bill 2. Credit Card 3. Savings accounts and small-time deposits 4. Retail money market mutual fundsSelect the correct answer using the codes given below
   • AOnly 1
   • BOnly 2
   • C1, 2 and 3
   • D1, 3 and 4
   Answer: (D) 1, 3 and 4
   Explanation

   Option d is the correct Money' refers to financial assets that are not hut can be easily converted into cash or used as of l is correct- Treasury bills are short-term that can be easily converted into 2 is incorrect- Credit cards are not considered as they involve borrowing and are not a form 3 is correct- These are bank accounts where be easily withdrawn or used for 4 is correct- Money market mutual funds invest low-risk securities and offer easy access to cash. Important Tips Near is sometimes called 'quasi money'. Some examples of Near Money Savings account Money funds Bank time deposits (certificates of deposit) Government treasury securities (such as T-bills) Bonds near their redemption date Foreign currenci es, especially widely traded ones as the US dollar, euro or yen

4. #4UPSC CSE Prelims 2022
   Which one of the following situations best reflects "Indirect Transfers" often talked about in media recently with reference to 5. India?
   • AAn Indian company investing in a foreign enterprise and paying taxes to the foreign country on the profits arising out of its investment
   • BA foreign company investing in India and paying taxes to the country of its base on the profits arising out of its investment
   • CAn Indian company purchases tangible assets in a foreign country and sells such assets after their value increases and transfers the proceeds to India
   • DA foreign company transfers shares and such shares derive their substantial value from assets located in India 6
   Answer: (D) A foreign company transfers shares and such shares derive their substantial value from assets located in India 6
   Explanation

   Option d is the correct transfers refer to situations where when own shares. or assets in India, the shares of entities are transferred instead of a direct the underlying assets in India. The amendments made ITA in 2012 clarified that if a company is registered outside India, its shares will be deemed to be or always been situated in India if they derive their from the assets located in India.As a result, who sold such shares of foreign companies enactment of the Act (i.e., May 28, 2012) also to pay tax on income earned from such sale. Important Tips

5. #5UPSC CSE Prelims 2021
   Consider the following: 1. Foreign currency convertible bonds. 2. Foreign institutional investment with certain conditions. 3. Global depository receipts. 4. Non -resident external deposits.Which of the above can be included in Foreign Direct Investments?
   • A1, 2 and 3
   • B3 only
   • C2 and 4
   • D1 and 4
   Answer: (A) 1, 2 and 3
   Explanation

   Option a is the correct I, 2 and 3 are Currency Convertible Bond' (FCCB) is a ed under the Issue of Poreign Currency and Ordinary Shares (Through Depository chanism) Scheme, 1993, as amended from time to Route for Issue of Foreign Currency (FCCBs) is Portfolio Investment is any investment made by resident outside India in capital instruments investment is (a) less than 10 percent of the post equity capital on a fuiiy diluted basis of a company or (b) less than 10 percent of the paid of each series of capital instruments of a listed is the percentage which defines whether it is direct made above 10 percent of the post issue paid-up will be considered as FDI. But Once an FDI investment in Indian securities has been thl'ough the purchase of Global Foreign Cun-ency Convertible Bonds Cun-ency Bonds issued by Indian issuers listed, traded and settled overseas. _: Option 4 is Non-Resident Exter

6. #6UPSC CSE Prelims 2019
   Which of the following is issued by registered foreign portfolio investors to overseas investors who want to be part of 35. Indian stock rnarket without registering themselves directly?
   • ACertificate of Deposits
   • BCommercial Paper
   • CPromissory Note
   • DParticipatory Note
   Answer: (D) Participatory Note
   Explanation

   Option d is the correct answer. Option d is correct. A Participatory Note or P-note is issued by registered foreign portfolio investors to overseas investors who want to be part of Indian stock market without registering themselves with the market regulator the Security and Exchange Board of India (SEBI)

7. #7UPSC CSE Prelims 2005
   Consider the following 1. Sen.sex is based on 50 of the most important stocks available on the Bombay Stock Exchange (BSE). 2. For calculating the Sensex, all the stocks are assigned. proportional weightage. 3. New York Stock Exchange is the oldest stock exchange in the world. ]Which of the statement/s given above is/are correct?
   • A2 only
   • B1 and 3
   • C2 and 3
   • DNone
   Answer: (A) 2 only
   Explanation

   Option a is the correct l is incorrect: Sensex is a shortened form of Exchange Sensitive Index, which is the of the Bombay Stock Exchange (BSE). It tracks of 30 major companies listed on the 2 is correct: For calculating the Sensex, all are assigned proportional weightage based on market 3 is incorrect: New York Stock Exchange is oldest stock exchange in the world. The oldest in the world is Amsterdam Stock in 1602. New York Stock Exchange (NYSE) is largest stock exchange by market capitalization of companies. It was founded in 1792

8. #8UPSC CSE Prelims 2003
   Debenture holders of a company are its
   • Ashareholders
   • Bcreditors
   • Cdebtors
   • Ddirectors
   Answer: (B) creditors
   Explanation

   Option b is the correct holders are the persons or firms who purchase of other company. They are not concerned management and regulation of the company. usually secured and carry a charge on the assets company, hence, debenture holders are the of the company

9. #9Previous year
   From the balance sheet of a company, it is possible to: [UPSC CSE Pre. 1999)
   • Ajudge the extent of profitability of the company
   • Bassess the profitability and size of the company
   • Cdetermine the size and composition of the assets and liabilities of the company
   • Ddetermine the market share, debts and assets of a company
   Answer: (C) determine the size and composition of the assets and liabilities of the company
   Explanation

   Option c is the correct financial accounting, a balance sheet is a summary financial status of an organisation which can be a a business partnership or a company. It is easier to determine the size and composition of the assets and the liabilities of the company. The financia l statement reports a company's assets, liabilities and shareholders' equity at a specific point in time and provides a basis for computing rates of return and evaluating its capital structure It is more important to maintain the balance sheet to ruri more effectively. The balance sheet is based on equation: Equity

10. #10UPPCS 2013
    Which among the following agency regulate the mutual funds in India?
    • ASEBI
    • BNational Stock Exchange
    • CReserve Bank of India
    • DIndian Bank Association
    Answer: (A) SEBI
    Explanation

    Option a is the correct and Exchange Board of India (SEBI) is that regulates the mutual funds in India under powers and functions. Important Tips SEBI is the apex regulator of the capital market and its intermediaries, including mutual funds. SEBI regulates mutual funds through the SEBI (Mutual Funds) Regulations, 1996, which lay down the rules and guidelines for the formation, registration, operation, management, and disclosure of mutual funds. SEBI also issues circulars and notifications from time to time to address various issues related to mutual funds. SEBI's main objectives are to protect the interests o f the investors, pronwte the development of the mutual fund industry, and ensure fail and transparent practices

11. #11Previous year
    Which among the following is not a speculator in the stock exchange? [. (Mains) 2004)
    • ABroker
    • BBull
    • CBear
    • DStag
    Answer: (A) Broker
    Explanation

    Option a is the correct answer The speculators are not genuine investors. They buy securities with the hope to sell them in the future at a profit. They are not interested in holding securities for a longer period Stock Exchange Speculator is divided in Bull, Bear, Lame duck, and Stag. Important Tips Bull: He is a speculator who purchases various types of shares He purchases to sell them at higher prices in future. He may sell the shares and securities before coming in possession. If the price falls then he suffers a loss. Bear: He is always in a position to dispose of securities which he does not possess. He m akes the profit on each transaction. He sells the various securities for the objective of taking advantages of an expected fall in prices. Broker: A broker is an individual or firm that acts as an intermediary between an investor and a securities exchange

12. #12State PCS 2021
    Sweat Equity shares issued to which of the following?
    • AOrdinary Sharehold.ers
    • BPreference Shareholders
    • CBoth (a) and (b)
    • DEmployees of the company
    Answer: (C) Both (a) and (b)
    Explanation

    Option dis the correct equity shares can only be issued by a company to or Employees, at a discount or for a than cash, for their providing of know-how or intellectual property rights like trademark, or value additions. Imortant Tips Equity shares are also known as ordinary shares. The holders of Equity shares are members of the company and have voting rights. Preference shares are the shares that promise the holder a fixed dividend, whose payment takes priority over that of equity share dividends. Preference shareholders do not have voting rights. A person having debentures is called a debenture holder. A debenture is a form of loan procured by the company from the public

13. #13Previous year
    Consider the following statements about a joint-stock company. 1. It has a legal existence. 2. There is limited liability of shareholders. 3. It has a democratic management. 4. It has collective ownership. of the statements given above are correct? [CDS 2019
    • A1 and 2
    • B1, 2 and 3
    • C3 and 4
    • D1, 2, 3 and 4
    Answer: (D) 1, 2, 3 and 4
    Explanation

    Option dis the correct 1 is correct- A joint-stock company has a existence from its shareholders, meaning it can enter into contracts, and sue or be sued in 2 is correct- The joint-stock company has for its shareholders This means that the of shareholders is limited to the amount invested in the company. In case of company debts obligations, shareholders are not personally their 3 is correct- Joint-stock companies under a system of democratic management, decisions are made collectively by the usually have voting rights and elect a to oversee the company's operations and decisions on their 4 is correct- A joint-stock company is by its shareholders, who contribute capital to in exchange for shares

14. #14UPSC CDS 2018
    Which one of the following statements about Exchange-Traded Fund (ETF) is not correct?
    • Ait is a marketable security
    • Bit experiences price changes throughout the day
    • CIt typically has lower daily liquidity and higher fees t han mutual fund share
    • DAn ETF does not have its Net Assest Value calculated once at the end of every day
    Answer: (C) It typically has lower daily liquidity and higher fees t han mutual fund share
    Explanation

    Option c is the correct typically have higher daily liq_uidity and lower fe to mutual fund shares. ETFs are designed to on stock exchanges throughout the day, similar stocks, which provides investors with liquidity ability to buy or sell shares at market prices. often have lower expense ratios compared to making th em a cost-effective investment option investors

15. #15Previous year
    Consider the following statements: 1. Most of India's external debt is owed by governmental entities. 2. All of India's external debt is denominated in US dollars.Which of the statements given above is/are correct? CSE Pre. 2019)
    • A1 only
    • B2 only
    • CBoth 1 and 2
    • DNeither 1 nor 2 13
    Answer: (C) Both 1 and 2
    Explanation

    Option c is the correct National Investment Fund (NIF) is a fund that up in November 2005 to channelize the proceeds of Central Public Sector Enterprises 1 is incorrect: The assets in the NIF are by the Union Ministry of Finance, but by Sector Mutual Funds, namely UTI Asset Ltd., SBI Funds Management Private Ltd. and Fund Asset Management Company 2 is incorrect: The NIF is not maintained Consolidated Fund of India, but as a separate under the Government Acc o 3 is correct: Certain Asset namely UTI Asset Management Company Ltd. SBI Funds Management Private Ltd. and LIC Mutual Management Company Ltd are appointed as the 4 is correct: A certain proportion of of the NIF is used for financing select social per the original scheme, of the annual income NIF was to be used for financing selected social which promote education, health and employment, while the residual was to be used to meet the

16. #16CGPSC 2020
    Which of the followin.g countries have formed NAMA-11?
    • ADeveloped countries
    • BDeveloping countries
    • CLeast developed countries
    • DDeveloping and least developed countries
    Answer: (B) Developing countries
    Explanation

    Option b is the correct is a group of 11 developing countries formed a coalition to negotiate on access (NAMA) in the World Trade Formed in 2006, NAMA-11 is working to deve loping countries have a fair share of the benefits NAMA negotiations. Member countries are Brazil, Egypt, India, Indonesia, South Africa and Tunisia

17. #17Practice set
    Consider the following statements with reference to the Gross Fixed Capital:l. It refers to the net increase in physical assets. 2. It is a component of expenditure approach for calculating Gross Domestic Product. 3. It represents the measure of total investment.How many statements given above are correct?
    • AOnly one
    • BOnly two
    • CAll three
    • DNone
    Answer: (B) Only two
    Explanation

    Option bis the correct I is correct. Gross fixed capital formation to the net increase in physical assets disposals). It does not account for the of fixed 2 is correct. It is a component of to calculating Gross Domestic Product (GDP). the share of gross fixed capital formation is far compared to that of increase in 3 is incorrect. Gross fixed capital is not a measure of total investment, because value of net additions to fixed assets is measured, and of financial assets, as well as stocks of inventories operating costs are excluded

18. #18Practice set
    What is Gross Investment in an economy?
    • AThe total investment made to the fixed assets of economy for a given year
    • BThe total investment by the government in infrastructure for a given year
    • CThe total investment made to the capital stock of economy for a given year
    • DThe total investment made in the stock market of the economy for a given year
    Answer: (C) The total investment made to the capital stock of economy for a given year
    Explanation

    Option c is the correct Investment is the total addition made to the of economy in a given period. Capital stock consists assets and unsold stock. So, investment in fixed a component of Gross Investment. So, gross the expenditure on purchase of fixed assets and during the accounting year. However, gross not indicate the actual change in economy's stock assets for a given year. During the some amount of fixed capital is used up. This fixed capital is known as depreciation. By from gross invesllueul, we eet Net Investment. Net Investment Gross Investment - Depreciation

19. #19Practice set
    In the context of Indian economy, which of the following is/are included within the scope of Gross Fixed Capital Formation (GFCF)? 1. Acquisition of produced assets 2. Acquisition of defence equipment 3. Purchases of second-hand assets by producersSelect the correct answer using the code given below
    • A1 only
    • B1 and 3 only
    • C1 and 2 only
    • D2 and 3 only
    Answer: (B) 1 and 3 only
    Explanation

    Option b is the correct 1 is correct. Gross capital formation refers 'aggregate of gross additions to fixed assets ( that is formation) plus change in stocks of inventories' counting period. Fixed asset refers to the and equipment. Gross fixed capital is defined as the acquisition of produced purchases of second-hand assets), including of such assets by producers for their own 2 is incorrect. Construction for (other than construction or alteration of for military personnel), acquisition of durable goods in the hands of the increase in the stocks of defence materials are the scope of gross fixed capital 3 is correct. Gross fixed capital includes the acquisition of produced purchases of second-hand assets. It also production of such assets by producers for their minus disposals. However, the expenditure incurred routine repair and maintenance is not covered of capital formation

20. #20Practice set
    Consider the following statements regarding the National Bank for Financing Infrastructure and Development (NBFID): 1. It will be a wholly owned subsidiary of the Reserve Bank of India. 2. It will be set up as a corporate body with authorized share capital of Rs. one lakh crore. 3. It will directly lend for infrastructure projects located in India. 4. It will facilitate the development of bonds market for infrastructure financing.How many of the statements given above are correct?
    • AOnly one
    • BOnly two
    • COnly three
    • DAll four
    Answer: (C) Only three
    Explanation

    Option c is the correct l is incorrect. The National Bank for and Development Bill, 2021 seeks to National Bank for Financing Infrastructure (NBFID). Initially, the Central own l shares of the institution. This share he reduced up to 2 is conrect. The NBFID will be set up as body with authorized share capital of one rupees, with financial and developmental 3 is correct. Financial objectives will be or indirectly lend, invest, or attract infni.structure projects located entirely or partly 1 is conrect. Developmental objectives the development of the market for bonds, derivatives for infrastructure Solution: Option a is the correct a is incorrect. Roll over risk is not a with investments in equity b is correct. Rollover risk is a risk the refinancing of debt, specifically, that the for a new loan will be higher than that on the c and dare correct. Generally, shorter the the maturing debt,

21. #21Practice set
    Consider the following statements regarding External Commercial Borrowing (ECB). 1. ECBs cannot be used for investment in stock market or speculation in real estate. 2. In India, SEBI monitors and regulates the ECBs. 3. Borrowers can use 75 per cent of the ECB to repay rupee debt.How many of the statements given above are correct?
    • AOnly one
    • BOnly two
    • CAll three
    • DNone
    Answer: (A) Only one
    Explanation

    Option a is the correct 1 is correct. According to the rules, ECBs used for investment in stock market or speculation in 2 is incorrect. Reserve Bank of India, along DEA (Department of Economic Affairs), Ministry Government of India, monitors and regulates and 3 is incorrect. Borrowers can use 25 per cent ECB to repay rupee debt and the remaining 75 per be used for new projects

22. #22Practice set
    With reference to the Government Security (G-Sec) in India, consider the following statements: 1. Central Government can issue both treasury bills and bonds. 2. State Governments can issue only bonds or dated securities. 3. Foreign Portfolio Investors are not allowed to participate in the G-Secs market.How many of the statements given above are correct?
    • AOnly one
    • BOnly two
    • CAll three
    • DNone
    Answer: (B) Only two
    Explanation

    Option b is the correct 1 and 2 is correct. In India, the issues both, treasury bills and bonds or while the State Governments issue only bonds securities, which are called the State 3 is incorrect. Foreign Portfolio Investors allowed to participate in the G-Secs market within limits prescribed from time to time

23. #23Practice set
    Consider the following statements:l. Bonds issued by the Government are commonly called Gilt-Edged Bonds/ securities. 2. Bonds can be issued by governments as well as private companies.Which of the statements given above is/are correct?
    • A1 only
    • B2 only
    • CBoth 1 and 2
    • DNeither 1 nor 2
    Answer: (C) Both 1 and 2
    Explanation

    Option c is the correct 1 is correct: G-Secs are also known as gilts 2 is correct. Bonds could be issued by well as private companies. Important Tips "G-Sec" means a security created and issued by the Government for the purpose of raising a public loan or for any other purpose as may be notified by the Government

24. #24Practice set
    With reference to Indian economy, which of the statements given below regarding bond yield is correct?
    • ABond yield is the return the government gets on the bond issued by it
    • BBond yield is not affected by the monetary policy of the Central Bank
    • CA rise in interest rates cause bond yields to rise
    • DIf the bond yield goes up, it results in capital nflows into equities
    Answer: (C) A rise in interest rates cause bond yields to rise
    Explanation

    Option c is the correct a is incorrect. Bond yield is the return an on that bond or on a particular government b is incorrect. The major factors affecting is the monetary policy of the Reserve Bank of the course of interest rates, the fiscal the government and its borrowing programme, economy, and c is correct. A rise in interest rates cause bond fall, and bond yields to rise. Whereas a fall in interest bond prices rise, and bond yields fall. In short, a bond yields means interest rates in the monetary fallen, and the returns for investors (those who bonds and govt securities) have Option d is incorrect. When bond yields go up, reallocating investments away from equities and as they are much safer. As bond yields rise, cost of investing in equities goes up, and less attractive

25. #25Practice set
    Which of the following statements is/are correct regarding the Over the Counter Exchange of India ( OTC EI)? 1. Large firms are not allowed to be listed on OTCEI. 2. Stocks listed on the OTCEI cannot be listed on other exchanges.Select the correct answer using the code given below
    • A1 only
    • B2 only
    • CBoth and 2
    • DNeither 1 nor 2
    Answer: (C) Both and 2
    Explanation

    Option c is the correct l is correct. The Over-The-Counter Exchange (OTCEI) is an electronic stock exchange based in consists of small and medium-sized firms aiming access to overseas capital markets, including in the U.S. such as the Company Restrictions: Companies with issued of more than 25 crore rupees million) are to be listed on 2 is correct. Stocks that are listed on will no,t be listed on the OTCEI and, listed on the OTCEI will not be listed on

26. #26Practice set
    Consider the following statements with respect to the municipal bonds: 1. It is an instrument that allows investors to purchase equity in local government projects. 2. They must have a rating above the investment-grade for the public issue. 3. These bonds cannot be traded in the secondary market which makes them less attractive.How many of the statements given above are correct?
    • AOnly one
    • BOnly two
    • CAll three
    • DNone
    Answer: (A) Only one
    Explanation

    Option a is the correct 1 is incorrect: A municipal bond is a debt instrument where investors offer loans governments. They are issued by civic bodies projects and usually have a 10-year 2 is correct. As per SEBI rules, "any any statutory body or board or corporation, or agency established or notified by any central or or any SPY notified by the state government or would be eligible to issue Municipal market regulator has mandated that the must have a rating above the investment-grade public 3 is incorrect: Municipal bonds are traded both primary market and secondary market. But the issue not very high there is very less liquidity in the It thus makes it difficult to invest through

27. #27Practice set
    With reference to the Foreign Currency Convertible Bonds, consider the following statements: 1. It is a type of convertible bond that can only be issued with a option. 2. They allow the issuer or bondholder the option to convert the bonds into shares mid-way during its term. 3. The conversion of bond to shares can only take at a pre-agreed price.How many of the statements given above are correct?
    • AOnly one
    • BOnly two
    • CAll three
    • DNone
    Answer: (B) Only two
    Explanation

    Option b is the correct 1 is incorrect. FCCBs are bonds issued by in the overseas market. A convertible bond is between a debt and equity instrument. These be issued along with a call option (whereby the right lies with the bond issuer) or put options the right of redemption lies with 2 is correct. It acts like a bond by making and principal payments, but these bonds also bondholder the option to convert the bond into 3 is correct. FCCBs usually carry clauses the issuer or bondholder the option to convert into shares mid-way during its term, at a o o k

28. #28Practice set
    It refers to the process of offering shares of a private corporation to the public in a new stock issuance which provide companies with an opportunity to obtain capital by offering shares through the primary market. The process mentioned here is
    • ASweat Share
    • BScrip Share
    • COffer for Sale (OFS)
    • DInitial Public Offer (IPO)
    Answer: (D) Initial Public Offer (IPO)
    Explanation

    Option d is the correct d is correct. Initial Public Offer (IPO) refers process of offering shares of a private corporation to in a new stock issuance which provide an opportunity to obtain capital by offering the primary market. Important Tips Sweat Share is a share given to the employees of the company without any charge. Scrip Share is a share given to the existing shareholders without any charge-also known as bonus share. Offer for sale (OFS) is a method of share sale through the exchange platform for listed companies, to make it easier for promoters of publicly-traded companies to cut their holdings and comply with the minimum public shareholding norms of SEBI order. Government also started using this route to divest its shareholding in public sector enterprises

29. #29Practice set
    Consider the following statements: 1. An investment can refer to any mechanism used for generating future income, including bonds, stocks, real estate property or a businesi,. 2. Unlike investment, transfer payments result into an exchange of goods or services for profit generation.Which of the statements given above is/are correct?
    • A1 only
    • B2 only
    • CBoth 1 and 2
    • DNeither 1 nor 2
    Answer: (A) 1 only
    Explanation

    Option a is the correct l is correct. An investment is essentially an is created with goal of generating income and over time. It can include bonds, stocks, real or a business among several other examples. concerns the outlay of some asset today (time, etc.) in hopes of a greater payoff in the future was originally put 2 is incorrect. Unlike an Investment concerns the outlay of some assets like time, effort in hopes of a greater payoff in the future than originally put in, a transfer payment includes no services exchanged. The latter thus, is a 'one-way doesn't lead to the ownership of any resource Ex.: PM scheme

30. #30Practice set
    In the context of mutual fonds, consider the following statements: 1. They are regulated by both Reserve Bank of India and Securities and Exchange Board of India) 2. In closed-ended schemes the units are not allowed to be traded on the stock exchange. 3. In open-ended scheme, the Net Asset Value (NAV) is fixed permanently to safeguard the investment.How many of the statements given above are correct?
    • AOnly one
    • BOnly two
    • CAll three
    • DNone
    Answer: (A) Only one
    Explanation

    Option a is the correct l is correct. Mutual funds operate in both market as well as capital market. Hence, they by both the Reserve Bank of India (RBI) and Exchange Board of India (SEBI). Mutual funds are compulsorily registered with SEBI, which acts first wall of defence for 2 is incorrect. A close-ended fund issue investors only once, when they launch an offer. units are listed on the stock exchange, where they on a daily 3 is incorrect. The mutual funds allot the units for their made, at a price based on Asset Value (NAV). NAV is the total value of a scheme divided by the total of units issued in the scheme. In open-ended mutual funds, can buy and sell units anytime they intend the NAV changes on a daily basis

31. #31Practice set
    With reference to an Initial Public Offering (IPO), consider the following statements: 1. It can be issued only by newly set up companies and not old companies. 2. A company offering its shares to the public is not obliged to repay the capital to public investors.Which of the statements given above is/are correct?
    • A1 only ( nnly
    • B2 only lfll Practiceboo r u
    • CBoth 1 and 2
    • DNeither 1 nor 2 176
    Answer: (B) 2 only lfll Practiceboo r u
    Explanation

    Option b is the correct l is incorrect. Initial public offering is by which a private company can go public by its stocks to general public. It could be a new, or an old company which decides to be listed exchange and hence goes 2 Is correct. A company offering its the public is not obliged to repay the capital to The investors become part owners of Companies raise equity capital with the help of by issuing new shares for the first time to the exbting shareholders can sell their shares to the raising any fresh capital

32. #32Practice set
    Which of the following statements best describe the term 'Green shoe Option'?
    • AThe amount actually paid by the shareholders or have been committed by them for contribution
    • BProvision under which a company issuing shares for the first time is allowed to sell some additional shares to the public
    • CDifference between the buying and selling prices of a share
    • DTransactions of stocks which take place outside the stock exchanges
    Answer: (B) Provision under which a company issuing shares for the first time is allowed to sell some additional shares to the public
    Explanation

    Option b is the correct shoe Option: A provision under which a shares for the first time is allowed to sell shares to the public-usually 15 per cent, is as over-allotment provision. It gets its name first company (Green shoe Company, USA) which such an option. Important Tips Subscribed The amount actually paid by the shareholders or have been committed by them for contribution. The difference between the buying and selling prices of a share is called spread. Higher the liquidity of a share lowers its spread and vice versa. Also known as Jobber's Turn or Margin or Haircut. Kerb The transactions of stocks which take place outside the stock exchanges-unofficially and take placl". after the normal trading houn;. /li

33. #33Practice set
    With reference to Securities and Exchange Board of India (SEBI), which of the following statements is/are incorrect? 1. It was established in 1992 by an executive resolution of the Government of 2. It registers and regulates credit rating agencies. 3. It can undertake inspection, conduct inquiries and audits of the stock exchanges. 4. The Board shall have the same powers as are vested in a civil court, while trying a suit.Select the correct answer using the code given below
    • A1 only
    • B2 and 3 only
    • C1, 2 and 3 only
    • D1, 2 and 4 only
    Answer: (A) 1 only
    Explanation

    Option a is the correct l is incorrect. The Securities and Exchange India is a statutory body. It was established on April 1992 in accordance with the provisions of the Securities Board of India Act, 2 is correct. SEBI registers and regulates of the depositories, custodians of securities, investors, credit rating agencies and such as the Board may 3 is correct. It may call for inspection, conduct inquiries and audits of exchanges, mutual funds, intermediaries and self regulatory organisations in the securities 4 is Board shall have the same powers as are vested in court under the Code of Civil Procedure, 1908, a suit, in respect of the following matters, namely - The discovery and production of books of account and other documents, at such place and such time as may be specified by the Board; Summoning and enforcing the attendance of persons and examining them on oath; Inspection of any

34. #34Practice set
    With reference to commodity exchanges in India, consider the following statements: 1. They are regulated by the Forward Markets Commission under the Ministry of Finance. 2. National Commodity and Derivatives Exchange Limited (NCDEX) primarily deals with agricultural commodities.Which of the statements given above is/are correct?
    • A1 only
    • B2 only
    • CDoth 1 and 2
    • DNeither 1 nor 2
    Answer: (B) 2 only
    Explanation

    Option bis the correct l is incorrect. The Forward Markets was merged with Securities and Exchange India (SEBI) in 2015. It was done to create a for commodities and capital markets which streamline monitoring of commodity futures curb wild 2 is Commodity and Derivatives Exchange primarily deals with agricultural currently holds nearly 78 percent of market share commodity segments. Life Insurance India (LIC), National Bank for Agriculture and (NABARD), National Stock Exchange some of the major shareholders in NCDEX

35. #35Practice set
    Consider the following the ways of raising capital in the Primary Market: 1. Public issue is open for all Indian citizens. 2. Private placement raises capital from the existing shareholders of a company. 3. Rights issue raises capital from select Financial Institutions and individuals.How many of the statements given above are correct?
    • AOnly one
    • BOnly two
    • CAll three
    • DNone
    Answer: (A) Only one
    Explanation

    Option a is the correct l is correct. Public issue is a public offer all Indian citizens. It is the most broad-based method 2 is incorrect. Rights issue is used to from the existing shareholders of a company. It is kind of issue restricted to a certain category public 3 is incorrect. Private placement raises select Financial Institutions and individuals. This through a process of direct can also place their shares to the Institutions. It is a quick way to source in India

36. #36Practice set
    Consider the following statements: 1. Equity financing allows a company to acquire funds without incurring debt. 2. Debt instruments provide capital to an entity that promises to repay the capital over time.Which of the statements given above is/are correct?
    • A1 only
    • B2 only
    • CBoth 1 and 2
    • DNeither 1 nor 2
    Answer: (C) Both 1 and 2
    Explanation

    Option c is the correct l is correct. Equity financing allows a acquire funds without incurring debt. On the other a bond does increase the debt burden of the because contractual interest payments must be unlike dividends, they cannot be reduced or 2 is correct. Debt instruments are tools, government entity, or business entity can the purpose of obtaining capital. Debt capital to an entity that promises to repay the time. Credit cards, credit lines, loans, and bonds be types of debt the term debt instrument focuses on debt by institutional entities. Institutional entities governments and both private and public companies

37. #37Practice set
    They are exchange-traded contracts to sell or buy financial instruments or physical commodities for a future delivery at an agreed price. There is an agreement to buy or sell a specified quantity of financial instrument commodity in a designated future month at a price agreed upon by the buyer and seller. They are
    • ASwaps
    • BFutures
    • CForward Contracts
    • DOptions
    Answer: (B) Futures
    Explanation

    Option b is the correct are exchange-traded contracts to sell or instruments or physical commodities for a at an agreed price. There is an agreement to buy a specified quantity of financial instrument a designated future month at a price agreed upon by and seller. Important Tips A derivative is an instrument whose value is derived from the value of one or more underlying instrument, which can be commodities, precious metals, currency, bonds, stocks, stocks indices, etc. Four most common examples of derivative instruments are Forwards, Futures, Options and Swaps. A forward contract is a customized contract between two parties, where settlement takes place on a specific date in future at a price agreed today. They are bilateral contracts and hence exposed to counter-party risk. The contract has to be settled by delivery of the asset on expiration date. An option is a derivative, a contract

38. #38Practice set
    Consider the following statements in the context of Indian Depository Receipts (IDR): 1. An IDR allows Indian companies to raise funds from the Foreign securities 2. IDRs are regulated by the Securities and Exchange Board of India (SEBI). 3. The IDRs are required to be listed on at least one stock exchange in India.How many of the statements given above are correcf?
    • AOnly one
    • BOnly two
    • CAll three
    • DNone
    Answer: (B) Only two
    Explanation

    Option b is the correct 1 is incorrect. An IDR is an in Indian Rupees in the form of a created by a Domestic Depository (custodian registered with the Securities and Exchange India) against the underlying equity shares of to enable foreign companies to raise funds Indian securities Markets. Statement 2 is correct. IDRs are regulated by the SEBI. issued guidelines for disclosure with respect to ID Rs the model listing agreement to be entered Exchange and the foreign issuer specifying 3 is correct. The IDRs are required to be at least one stock exchange in India, having

39. #39Practice set
    Consider the following statements:l. Corporatisation and Demutualization means the separation of ownership, management and trading rights in the stock exchanges. 2. Corporatisation and Demutualisation of Stock Exchanges reduces conflicts of interest, and creates greater management accountability.Which of the statements given above is/are correct?
    • A1 only
    • B2 only
    • CBoth 1 and 2
    • DNeither 1 nor 2
    Answer: (C) Both 1 and 2
    Explanation

    Option c is the correct l is correct. Corporatisation of Stock Exchanges means the ownership, management and trading rights in the leads to greater transparency in dealings and 2 is correct. It reduces conflicts of greater management accountability, and takes the interest of other players

40. #40Practice set
    With reference to 'Angel Investors', consider the following statements: 1. Angel investors provide financial backing to entrepreneurs for starting their business. 2. Investment from entrepreneur's family and friends cannot be termed as angel investments. 3. They are regulated by SEBI (Securities and Exchange board of India).How many of the statements given above are correct?
    • AOnly one
    • BOnly two
    • CAll three
    • DNone
    Answer: (B) Only two
    Explanation

    Option b is the correct l is correct. Angel investor is an investor financial backing to entrepreneurs for business'. A new term in India's financial in the Union Budget 2013-14 which SEBI will soon prescribe the provisions by which investor can be recognised as Category I AIF capital 2 is incorrect. Angel investors are usually an entrepreneur's family and friends but they from outside also. The capital they provide can be a onetime injection of seed money or ongoing support to company through difficult times-in exchange they owning share in the business or provide capital as 3 is correct. Angel investors are a part investment funds, and are regulated by investor are focused on helping the business than reaping a huge profit from their investors are essentially the exact opposite of a in their 'intention' (who has high profit their prime focus). But in one sense both-an and a venture inv

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