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Capital Markets — UPSC Prelims Economy previous year questions — page 2

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. #41Practice set
   With rderence to Masala bonds, which of statements is/are incorrect? l. It gives Indian borrowers a choice for external commercial borrowings. 2. Foreign investors bear the currency risk. 3. International Finance Corporation issued a 50-year Masala Bond in London Stock Exchange.Select the correct answer using the code given below
   • A1 only
   • B3 only Practicebo
   • C1 and 2 only
   • D2 and 3 only
   Answer: (B) 3 only Practicebo
   Explanation

   Option b is the correct I is correct. IFC issued the Masala Bonds capital markets outside India to raise money and Indian companies thereby diversifying and adding funding sources for Indian borrowers under Borrowing to Reserve Bank of India's statistics, Masala for of the total external fund raising of by Indian companies during 1 Statement 2 is correct. Unlike other External (ECBs) like commercial bank loans, suppliers' credit, securitized instruments such Rate Notes and Fixed Rate Bonds etc., which be taken as foreign currency loans and repaid bonds enable Indian companies to take in return in rupees. Thereby, effectively putting risk on Foreign 3 is incorrect. Recently, IFC issued a Bond on London Stock Exchange. IFC has Masala bonds in maturities of three, five, seven, and The latest 15-year bonds mark the latest step in to extend the yield curve and set a pricing future issuances w

2. #42Practice set
   Which of the following are the advantages/ benefits of making investments into Mutual Funds? 1. Diversification of risks. 2. Managed by professionals. 3. Assured and fixed returns. 4. Convenience and fair pricing.Select the correct answer using the code given below
   • A1 and 2 only
   • B1, 2 and 4 only
   • C2, 3 and 4 only
   • D1, 2, 3 and 4
   Answer: (B) 1, 2 and 4 only
   Explanation

   Option bis the correct l is correct. Diversification of risks: The value investment may not rise or fall in tandem. When the one investment is on the rise the value of another may decline. As a result, the portfolio's overall a lesser chance of being reduces the risk involved in building thereby further reducing the risk for an investor. Funds consist of many securities, investor's safeguarded if there is a downfall in other securities 2 is correct. Expert Management / Management: A new investor may not have or information on how and where to invest. The experts manage and operate mutual funds. The experts money from investors and allocates this money in thereby helping the investors incur a 4 is correct. Convenience and Fair funds are easy to buy and easy to understand. have low minimum investments they only once per day at the closing net asset value. price fluctuation throughout the d

3. #43Practice set
   Consider the following statements with reference to bond prices in an economy: 1. It may increase if the market interest rate decreases. 2. It may increase if the credit rating of issuer increases. 3. It may increase if inflation in economy decreases.How many of the statements given above are correct?
   • AOnly one
   • BOnly two
   • CAll three
   • DNone
   Answer: (C) All three
   Explanation

   Option c is the correct l is correct. Most bonds pay a fixed interest becomes more attractive if interest rates fall, demand and the price of the bond. Conversely, if rise, investors will no longer prefers the lower rate paid by a bond, resulting in a decline in its 2 is correct Credit rating agencies assign to bond issuers and to specific bonds. A can provide information about an issuer's make interest payments and repay the principal on In general, the higher the credit rating, the more issuer is to meet its payment obligations - at least in of the rating agency. If the issuer's credit rating the price of its bonds will rise. If the rating goes down, drive their bond prices 3 is correct. In general, when inflation is on bond prices fall. When inflation is prices rise. That's because rising inflation erodes power of what you'll earn on your other words, when your bond matures, the retur

4. #44Practice set
   In context to financial markets in India, what is the 'Rights Issue'? 1. It is a mechanism by which companies can raise additional capital from existing shareholders. 2. Through Rights Issue, the existing shareholders can purchase new shares at a discount price. 3. Under Rights Issue, companies can make it obligatory for the existing shareholders to buy new shares.Select the correct answer using the code given below
   • A1 and 2 only
   • B1 and 3 only
   • C2 and 3 only
   • D1, 2 and 3
   Answer: (A) 1 and 2 only
   Explanation

   Option a is the correct I is correct. A rights issue is an invitation shareholders to purchase additional new shares in the company. This type of issue gives existing called right. Under this, the company gives shareholders the right to subscribe to newly in proportion to their existing holdings. Rights issue more democratic approach to raising funds this is allows the existing shareholders the right to invest first 2 is correct. It is one of the modes of popular with Indian companies. Through the company makes an offer to existing buy additional shares in the company at a (rights offer price) within a prescribed period. can purchase new shares at a discount to price on a stated future date. The company is a chance to increase their exposure to the a discount 3 is incorrect. Cash-strapped companies to rights issues to raise money when they really In these rights offerings, companies gran

5. #45Practice set
   Which one of the following statements is correct regarding the Additional Tier-1 (AT-1) bond?
   • AIt is a type of unsecured bond having a minimum maturity period of l O years
   • BIt is generally issued by the banks to meet the capital requirements under the BASEL norms
   • CA bank issuing AT-1 bonds have to mandatorily make interest payments to the investors every year
   • DIt is a debt instrument that always pay the investor a maturity amount lower than the purchase price of the bond
   Answer: (B) It is generally issued by the banks to meet the capital requirements under the BASEL norms
   Explanation

   Option b is the correct a is incorrect. Additional Tier- I bonds are a unsecured perpetual bonds having no maturity they carry call options that allow banks to after five or 10 years. However, banks are not obliged this call option and can opt to pay only interest on for b is correct. AT-1 bonds are generally issued to shore up their core capital base to meet the Basel c is incorrect. Banks issuing AT-1 bonds can payments to the investor for a particular year or the bonds' face value, provided their capital ratios certain threshold d is incorrect. Negative Yield Bonds are by central banks or governments and investors to the borrower to keep their money with them. Important Tips Negative-yield bonds (not Additional Tier 1 bonds) arc debt instruments that offer to pay the investor a maturity amount lower than the purchase price of the bond. They are generally issued during times of stress

6. #46Practice set
   With reference to 'Accredited Investors' in Indian securities market, consider the following statements: 1. Accredited investors will enjoy certain relaxations in respect of their participation in financial market. 2. An entity will be identified as 'Accredited investor' on the basis of net worth or income. 3. According to SEBI, individuals and Hindu Undivided Family cannot become 'Accredited investors' in 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 1 is correct. Accredited investors will have to participate in some investment products. have relaxaliun in participation with an lesser than the minimum amount mandated in Investment Fund (AI-F) norms and Services (PMS) rules. Accredited investors, professional investors, who have an understanding of products and the risks and returns associated 2 is correct. A person or entity will be an accredited investor on the basis of net worth Markets regulator SEBI has introduced the 'accredited investors' in the Indian securities market, expected to open up a new channel for raising 3 is incorrect. Individuals, Hindu (HUFs), family trusts, sole firms, trusts and body corporates can based on financial parameters specified individual, HUF, family trust or an accredited investor if their annual income is at least or net worth is at least 7.50 crore, with at least half in fi

7. #47Practice set
   Consider the following statements with reference to the difference between option and swap: 1. Options are traded on over-the-counter as well as on stock exchange while Swap is only traded on over-the-counter market. 2. Acquiring an option involves upfront premium payment whereas there is no such payment involved in a swap.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 l is correct: A key difference between swap is that a swap is not traded via the exchanges. A an over-the-counter (OTC) derivative type whereas can be either an OTC or exchange-traded are contracts that are customised and traded two 2 is correct: The premium is the price a the seller for an option. The premium is paid upfront an option and is not refundable - even if the not exercised. Premiums are quoted on a per-share no swap transactions involving upfront payment or its equivalent in any form shall be undertaken

8. #48Practice set
   In the context of Chit fonds and Mutual Funds, consider the following statements: 1. Chit fund is a professionally-managed investment scheme, while mutual funds are a saving scheme managed by community of group of people. 2. Chit fund is regulated by the Registrar of Chits appointed by respective state governments and Mutual funds are regulated by SEBI.Which of the statements given above is/are correct?
   • A1 only
   • B2 only
   • CBoth 1 and 2
   • DNeither 1 nor 2
   Answer: (B) 2 only
   Explanation

   Option b is the correct I is incorrect: Chit fund is a sort of where a group of people come together to predefined amount for a certain period. Each person chance to claim the pool amount either by lot auction. Mutual Funds are scheme brings together a group of people their money in stocks, bonds and other 2 is correct: Chit fund business is regulated Central Chit Funds Act, 1982 and the rules framed Act by the various state governments for this Central Government has not framed any rules for them. Thus, registration and regulation of are carried out by state governments under the by them. They are regulated by the Registrar of by respective state governments under Section Chit Funds Act Funds are maintained and regulated by Exchange Board of India

9. #49Practice set
   With reference to 'Capital Market' in an economy, which one of the following statements is correct regarding 'Social Stock Exchange'?
   • AIt is a platform for investors to donate their small percentage of earniug towards social and humanitarian cause
   • BIt will be a portal for corporate entities to invest in social sectors under Corporate Social Responsibility
   • CIt aims to streamline the funds from various government and private agencies into public schemes dedicated to upliftment of vulnerable section of the society
   • DIt will help social and voluntary enterprises to raise capital in form of equity or debt or a unit of the mutual fund
   Answer: (D) It will help social and voluntary enterprises to raise capital in form of equity or debt or a unit of the mutual fund
   Explanation

   Option d is the correct Stock Exchange (SSE) is a platform that allows invest in select social enterprises or social initiatives. is to help social and voluntary enterprises to raise form of equity or debt or a unit of the mutual Enterprise is a revenue-generating business. aim of social enterprise is to achieve a such as providing healthcare or clean energy. in countries such as Singapore, UK among countries allow firms operating in social sectors risk proposal to set up in the country was first the Union Budget in 2019, SEBI constituted a group under the chairmanship group veteran Ishaat Hussain. In 2020, SEBI again set up the Technical Group (TG) Bhanwala, ex-Chairman, NABARD. This time further expert advice and clarity on SSE. submitted its report

10. #50Practice set
    Consider the following pairs:Types of Bonds Features 1. Additional Tier Used by the Banks to 1 bonds augment their core equity base and comply with Basel norms. 2. Consol Bonds Used by Government during emergency in form of fixed income security with no maturity date. 3. Surety Bond Used by Oil companies as zero interest maturity coupon against international currency risk. 4. Negative Yield Investor receives less Bonds money at the bond's maturity.How many of the above pairs are correctly matched?
    • AOnly one
    • BOnly two
    • COnly three
    • DAll four
    Answer: (C) Only three
    Explanation

    0 ption c is the correct I is correctly matched. Additional Tier l bonds bonds are a type of perpetual debt instrument use to augment their core equity base and with Basel HI 2 is correctly matched. Consol bond (also perpetual bond) is a fixed income security with date. It is often considered a type of equity, debt. They are usually issued by government in crisis or any emergency like situation. The bonds in 1917 as the British government sought to money to finance the ongoing cost of World 3 is incorrectly matched. A surety bond is a contract entered into by three the obligee, and the surety. The obligee, government entity, requires the principal, typically owner or contractor, to obtain a surety bond as against future work 4 is correctly matched. A negative bond yield is investor receives less money at the bond's maturity original purchase price for the bond. Important Tips Additional

11. #51Practice set
    With reference to SENSEX in India, consider the following statements: 1. It is one of the benchmark indexes of the BSE Limited. 2. It is comprised of 50 of the largest and most actively-traded stocks. 3. Its value is calculated in terms of both Indian rupees and U.S. dollars. 4. Its composition is re-evaluated once in every five years as per the performance of stocks of the companies.How many of the above given statements are correct?
    • AOnly one
    • BOnly two
    • COnly three
    • DAll four
    Answer: (B) Only two
    Explanation

    Option b is the correct l is correct. Sensex is the benchmark index BSE in India. It was launched in 1986, as a basket of representing the country's largest, listed on the 2 is incorrect. SENSEX is the benchmark the Bombay Stock Exchange (BSE) in India. The is made up of 30 (not 50) of the BSE's largest actively traded stocks, and it serves as a gauge for 3 is correct. Sensex is calculated in and U.S. dollars. As they reflect both domestic benchmarks for the Indian market and in both stock prices and exchange rates 4 is incorrect. The Sensex is reviewed and semi-annually each year in June and December

12. #52Practice set
    With reference to capital market in India, which of the following statements is incorrect?
    • AA 'Rights Issue' is an invitation to the existing shareholders to purchase additional new shares in the company
    • BAn 'Initial Public Offering' denotes a transition from a public limited company to a private company
    • CA 'Qualified Institutional Placement' enables a company to issue shares to the public without going through standard regulatory procedures
    • DA 'Buyback' can help a company to reduce the number of shares available in the open market
    Answer: (B) An 'Initial Public Offering' denotes a transition from a public limited company to a private company
    Explanation

    Option b is the correct a is correct: A rights issue is an invitation shareholders to purchase additional new shares company. This type of issue gives existing called b is incorrect: An initial public offering to the process of offering shares of a private the public in a new stock issuance for the first time. It a transition from a private to a public c is correct: Qualified institutional are a way to issue shares to the public through standard regulatory compliance. QIP is of a securities issue given by the Securities Board of India (SEBI). QIP allows an (public company) to raise capital from without the need to submit any pre-issue filings d is correct: A buyback, also known as a is when a company buys its own to reduce the number of shares available on the

13. #53Practice set
    With reference to financial markets, which of the following statements is correct?
    • ACapital market is a place where buyers and sellers indulge in trade of financial securities for a period of minimum five years
    • BA Primary market is one in which a company issues its new shares on a stock exchange
    • CThe long-term financial market does not include stock purchases in the primary market
    • DCash Management Bill is one of the important instruments in long term financial market
    Answer: (B) A Primary market is one in which a company issues its new shares on a stock exchange
    Explanation

    Option b is the correct answer Statement a is incorrect. Capital market is a place and sellers indulge in buying/selling of like bonds, stocks. (Not necessarily 5 years). financial market of an economy is known as market'. This market makes it possible to raise long term money (capital), i.e., for a period of minimum 365 Statement b is correct. A primary market is one in which issues new security in stock exchange. market deals with the exchange of prevailing securities among c is incorrect. Long term financial commodity and stock purchases in both and secondary market. Primary market is for new shares or d is incorrect. The Government of India, with the RBI, decided to issue a new known as Cash Management Bills, since to meet the temporary cash flow mismatches of The Cash Management Bills are discounted instruments issued for maturities less days

14. #54Practice set
    Consider the following statements with reference to the Exchange Traded Funds (ETFs): 1. Through ETFs, one can only invest in equities and not in debt instruments. 2. Compared to Mutual Funds, ETFs generally have higher liquidity. 3. ETFs can be actively bought and sold on the stock exchanges.How many of the above given statements are correct?
    • AOnly one
    • BOnly two
    • CAll three
    • DNone
    Answer: (B) Only two
    Explanation

    Option bis the correct exchange traded fond (ETF) is a cluster of merged together in a single fond that is the stock exchange. It is a marketable security that index, a commodity, bonds, or a basket of assets like l is incorrect. An exchange traded fund a person to invest in debt instruments. Debt the investors to realise returns on their exposure to fixed-income securities. Debt ETFs are sometimes referred to as bond ETFs due to exposure to bonds as the underlying 2 is correct. Exchange-traded funds (ETFs) liquidity than mutual funds, making them not investment vehicles but also convenient to tap cash flow is 3 is correct: The main difference between Mutual Fund is that while ETFs can be actively sold on the stock exchanges, just like any other one can only purchase a unit of a Mutual Fund from house even though these can be listed on the exchanges

15. #55Practice set
    Consider the following statements with reference to Securities and Exchange Board of India: 1. Presently, it is functioning as a statutory body in India. 2. The Chairman of SEBI is nominated by the Union Government.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: Securities and Exchange Board was established as a non-statutory body without power. Following the passage of the Securities Board of India Act by Parliament in 1992, it autonomous and statutory powers. Securities Board of India is thus presently a statutory a market regulator, which controls the securities 2 is correct: The board consists of a several other whole time and part time members. is nominated by the union government. include two members from the finance ministry, from Reserve Bank of India and five other also nominated by the Centre

16. #56Practice set
    "In this type of investment, a company may take controlling ownership in a business entity of another country. Foreign companies are directly involved with day to-day operations in the business entity in other countries. The foreign companies not only bring money, but also knowledge and technolog The above description can be most appropriately summed up by which of the following?
    • AForeign Institutional Investment
    • BInvestment by Participatory Notes
    • CForeign Direct Investment
    • DOffshore Derivatives Instrument
    Answer: (C) Foreign Direct Investment
    Explanation

    Option c is the correct a is incorrect: Foreign institutional the portfolio investment by foreign institutions funds, insurance companies, pension funds, shares and debentures. Foreign institutional are those institutional investors which invest in belonging to a different country other than that organizations are b is incorrect: Participatory notes are often as PNs or P-Notes. These are financial instruments used and hedge funds to invest in the Indian no registration is required with the c is correct: Foreign direct investment (FDI) of investment is when a company takes in a business entity in another country. direct investment, foreign companies are with day-to-day operations in the other means foreign companies not only bring money to but also knowledge, skills and technology. Option d is incorrect: Offshore derivatives are investment vehicles used by overseas an exposure in Indian e

17. #57Practice set
    "It is a derivative instrument used by foreign companies to raise money in India. They are issued by domestic depository in India and are denominated in Indian Rupees. Just Hke equity share, they provide ownership in the company;' The above paragraph best describes which of the following financial instruments?
    • AGlobal Depository Receipts
    • BParticipatory Notes
    • CIndian Depository Receipts
    • DConvertible Debentures
    Answer: (C) Indian Depository Receipts
    Explanation

    Option c is the correct Indian Depository Receipt (IDR) is issued by depository in India and denominated in represents an ownership interest in a fixed number equity shares of the Issuing Company. companies are not allowed to list on Indian IDR is a way to own shares of those foreign company issues and deposits new shares Indian depository (say, National Securities (NSDL) or Central Depository Service Ltd or a depository then, in turn, issues equivalent shares to investors in India. Much like an equity share, it ownership pie of a company. IDRs involve currency the underlying shares in another country. the exchange rate could impact the value of the

18. #58Practice set
    With reference to Partidpatm-y notes (P-notes), consider the following 1. They can only be issued by the Securities and Exchange Board of India. 2. Tnvestments through P notes are considered as offshore derivative 3. Holder of P-notes enjoys voting righls in relation to his/her investment in securities/ shares.How many of the above given statements are correct?
    • AOnly One
    • BOnly Two
    • CAll Three
    • DNone
    Answer: (A) Only One
    Explanation

    Option a is the correct l is incorrect. P-notes are issued by portfolio investors and not by SEBI, investors who wish to be part of the Indian without registering themselves 2 is correct. Investments flowing through considered as offshore derivative investments issued the new Regulations for Foreign participatory notes where it got formally defined under the tag "Offshore Derivative Instrument" of the said 3 is incorrect. The P-notes holder does not voting rights in relation to security/shares the investor in P-notes does not own the security, which is held by the FII who issues Notes

19. #59Practice set
    Consider the following statements regarding 'Qualified Institutional Placement': 1. It is a tool used by Listed Companies to raise capital domestically from institutional investors. 2. Foreign Institutional Investors are barred by SEDI to invesl in public companies through Qualified Institutional Placement route.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. Qualified Institutional the listed companies to raise finance through of securities to qualified institutional buyers (QIBs). a tool used hy publicly listed companies to raise domestically from institutional 2 is incorrect. Foreign institutional with SEBI are allowed to place Qualified Institutional Placement. Only the investors, who follow certain regulations and by SEBI are allowed to invest through Placement process. This group of investors known as a Qualified Institutional Buyer lo SEBI, QIBs are defined as follows: banks; Mutual funds; Foreign registered with SEBI; Multilateral and financial institutions; Venture capital with SEBI. Important Tips A qualified institutional placement (QIP) is a way for listed companies to raise capital without having to submit legal paperwork to market regulators. It is common in Tndia anrl othrr Asian countries.

20. #60Practice set
    Consider the following statements with reference to Exhange Traded Funds (ETFs): 1. It is a basket of secmitil's that is traded on the stock exchange. 2. ke mutual funds, they are only traded once 1.1 day after the market closes. 3. There are no underlying assets involved in these operations.How many of the above given statements are correct?
    • AOnly One
    • BOnly Two
    • CAll Three
    • DNone
    Answer: (A) Only One
    Explanation

    Option a is the correct 1 is correct: An ETF is a basket of of which are sold on a stock exchange. An fund (ETF) is a type of security that tracks sector, commodity, or other asset, but which purchased or sold on a stock exchange the same way stock. ETFs are a mix of open-ended and 2 is incorrect: ETF share prices fluctuate all the ETF is bought and sold; this is different from that only trade once a day after the market Le lrnde,l al auy poiul the trading 3 is incorrect: Commodities, like gold, traded in ETPs. There isn't any physical commodity. The investor is just provided with an similar to a stock certificate. Important Tips Bharat 22 is an ETF that will track the performance of 22 stocks of Central Public Sector Enterprises (CPSE), Public Sector Banks and strategic holding of SUUTI (Specified Undertaking of Unit Trust of India). The 22 stocks are diversified acrnss six sectors such

21. #61Practice set
    In context of Indian stock market, consider the following statements: 1. Scrip Issue is the process of creating new shares which are given free of charge to existing shareholders. 2. Badla is carrying forward of transactions from one settlement period to another without effective delivery. 3. Kerb dealings are the transactions of stocks which take place outside the stock exchanges.How many of the above given statements are correct?
    • AOnly One
    • BOnly Two
    • CAll Three
    • DNone
    Answer: (C) All Three
    Explanation

    Option c is the correct l is correct: In corporate finance, a scrip the process of creating new shares which are given ge Lo ex isling slwreholders. Bonus shares Issue known as: Bonus issue/Scrip issue/Capitalisation are additional shares given to shareholders 2 is correct: Badia is carrying forward from one settlement period to effective delivery. This is permitted only securities and is done at the making up price usually the closing price of the last day of settlement was finally banned in 2001 by SEBI. Undha Badia Badia are called backwardation and they are the 3 is correct: Kerb dealings are the stocks which take place outside the stock exchanges unofficially and take place after the normal trading is also associated with the trading of shares outside of official stock markets or at hours when those are closed Important Tips A financial instrument is defined as a document that indic

22. #62Practice set
    Which of the following conditions is not conducive for the occurrence of the demographic dividend in a country?
    • AWhen a country is having a bell-shaped population pyramid. 45
    • BWhen mortality and fertility rate is on a declining trend
    • CWhen the share of non-working age population is larger than working age population
    • DWhen conducive economic policies are put in place
    Answer: (C) When the share of non-working age population is larger than working age population
    Explanation

    Option c is the correct dividend is not conducive when is high. Demographic dividend is a window when share of the working age 15 and 64 years of age increases and share of elderly people age group decreased. Thus, changes in structure due to the demographic transition lower ratio'. Important Tips Demographic Dividend is a demographic and economic concept. It refers to an accelerated economic growth that a nation experiences once in a lifetime. It occurs when working age population grows at a faster pace than dependent population, provided that government policies and institutions are conducive to create employment opportunities for an expanding labom force. Demographic Dividend is the result of decline in a country's mortality and fertility and the subsequent change in the age structure of the EIII Dome-shape or bell-shaped pyramid is seen in countries like India, Bangladesh, Mexico and

23. #63Practice set
    With. respect to strategic disinvestment which. of the following statements is/are incorrect? l. It is the process of sale of shares along with transfer of management control. 2. Only loss-making public-sector undertakings are sold by this process. 3. A total minimum share of is disinvested.Select the correct answer using the code given below
    • A1 only
    • B2 only
    • C1 and 3 only
    • D2 and 3 only
    Answer: (D) 2 and 3 only
    Explanation

    Option d is the correct 1 is correct. Strategic disinvestment is the transferring of majority share in the PSU. In this over management is also 2 is incorrect. Moving away from strategy, strategic disinvestment focused out trom non-strategic sectors even if the either profit or loss making 3 is incorrect. In strategic disinvestment, a share of 51 (and not is transferred. the management control automatically shifted to buyers

24. #64Practice set
    Which of the following is/ are the reasons for decline in railways' share in transportation of surface freight since independence? 1. Non-Competitive Tariffs 2. Small fleet size 3. Slow speeds 4. Poor last mile connectivity PMENTSelect the correct answer using the code given below
    • A1, 2 and 3 only
    • B2, 3 and 4 only
    • C1, 3 and 4 only
    • D1, 2, 3 and 4
    Answer: (C) 1, 3 and 4 only
    Explanation

    Option c is the correct l is correct: The Economic Survey 2017-18 Tariffs as the primary reason for in the railways' share of surface freight means that the prices charged by the Railways of freight arc very high compared to such as waterways and roads. This is because of of cross subsidisation. This means that in order prices of passenger tickets relatively unchanged ( competitive compared to air fare as well as to poor section of the society) for the past many high inflation rates, the Railways has to charge for freight transportation in order to at least This makes railways a less profitable option for businesses, who subsequently 2 is incorrect: The network of the railways and of wagons dedicated to freight movement are and adequate, especially compared to the and fledgling modes like waterways. So this 3 is correct: Due to a combination of factors like the high traffic of passenger

25. #65Practice set
    Consider the following statements: 1. Demutualisation is a process through which the debt of a company is transformed into equity shares. 2. Corporatization is transferring control of a government-owned entity to a private entity.Which of the statements given above is/are correct?
    • A1 only
    • B2 only
    • CBoth 1 and 2
    • DNeither 1 nor 2
    Answer: (D) Neither 1 nor 2
    Explanation

    Option d is the correct l is incorrect: Demutualization is a process a private, member-owned company, such as a or a mutual life insurance company, its structure, in order to become a owned by shareholders. Demutualisation associations to conduct commercial business to profit just like a normal corporate entity. also allow the exchange to put in place a board to look after day-to-day 2 is incorrect: Corporatization occurs when reorganizes the structure of a government owned entity into one that resembles a private transferring control to private entity). tend to have a board of directors, shareholders. But the government is the only the shares in the company are not publicly goal of the government is to retain ownership the entity to operate efficiently and is the action of an organization selling or liquidating an asset or subsidiary

26. #66Practice set
    With reference to Participatory Notes, which of the following statements is/are correct? l. They are issued by registered foreign Portfolio Investors to unregistered overseas investors. 2. In India, investments through participatory notes are more in equities than debts.Select the correct answer using the code given below
    • 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. Participatory Note (PNs) is instrument issued in foreign jurisdiction, by Institutional Investor FPI registered Securities and Exchange Board of India (SEBI), are issued to overseas investors who want to be the Indian stock market without registering 2 is correct. In India, investments notes is more in equities than debts. total Rs 87,132 crore invested through the route Rs 78,870 crore was invested in 7,562 crore in debt, and Rs 700 crore in hybrid securities

27. #67Practice set
    Consider the following pairs:Type of Meaning Currency 1. Hard Currency issued with the 24. Currency backing of gold or other very credible assets. 2. Soft It is just paper currency Currency backed by government bonds. 3. Hot It is the term for the Currency Forex market and is the temporary name for any Hard currency. 4. Heated- Domestic currency which Currency is under pressure of depreciation due to a hard currency.How many of the above pairs are correctly matched?
    • AOnly one
    • BOnly two
    • COnly three
    • DAll four
    Answer: (B) Only two
    Explanation

    Option b is the correct l is incorrect: Hard money is different from Hard currency is the one like the US Dollar very acceptable in the international market and is used medium of exchange for international transactions. is the money issued with the backing of gold very credible assets. This type of money issue was nearly one century 2 is incorrect: Soft money is different from Soft currency is the one which is less a medium of exchange in the international market. is just paper currency backed by Here money is printed without keeping like gold in proportion to the newly issued 3 is correct: Hot currency is the term for the and is the temporary name for any Hard any Hard currency is exiting any economy at a fast the time, the Hard currency is said to be Hot example, in the case of the SE Asian crisis, the US 4 is correct: Heated currency term is used to domestic currency which is under pr

28. #68Practice set
    Consider the following statements: 1. India is the largest consumer of sugar in the world. 2. The total cost of producing sugar in India is the cheapest among its global peers. 3. Sugarcane juice cannot be used for production of ethanol. 4. Government of India does not maintain any buffer stock for sugar.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. India is the largest consumer in the 2 is incorrect. In Brazil, Thailand and cane price per ton was USD 25.11, 27.45 and while in India it was USD 42.30 (in season). This makes nearly a difference in As a result, the of pi'mludng sugar in out to he Rs. 36 per kilo as compared to Rs. 3 is incorrect. Government notified the Policy on Biofuels, 2018, under which has been allowed for the production of 4 is incorrect. Government of India stock of 30 LMT in the 2017-18 sugar season. sugar season, the buffer stock is to be increased LMT at a reimbursement cost of Rs. 1674 crore

29. #69Practice set
    With respect to 20th Livestock Census, which of the following statements is/are correct? 1. Livestock census is conducted once in every 5 years 2. The census was conducted by Ministry of Agriculture Farmers' Welfare. 3. It covers both rural and urban areas.Select the correct answer using the code given below
    • A1 and 3 Only
    • B1 and 2 Only
    • C2 and 3 Only
    • D1, 2 and 3
    Answer: (A) 1 and 3 Only
    Explanation

    Option a is the correct l is correct: The Livestock Census in the in the year 1919-1920. Since then, it has once in every 5 years. The 20th Livestock in October 2018.. Statement 2 is incorrect: The Department of Dairying, Ministry of Fisheries, and Dairying released the 20th Livestock 3 is correct: Under the livestock census, of animals possessed by households, or non-household enterprises and counted at site - both in rural and urban areas

30. #70Practice set
    Which of the following statements correct regarding commodity trading in agricultural products? 1. The NCDEX (National commodity and derivative exchange limited) is the country's largest farm derivative exchange. 2. NMCE (National multi commodity exchange) launched India's first agricultural futures trading index 'Agridex'. 3. Category Alternative Investment Funds (AIFs) are allowed to participate in commodity derivative markets, but mutual funds are not allowed to participate.Select the correct answer using the code given below
    • A1 only
    • B1 and 2 only
    • C2 and 3 only
    • D1, 2 and 3
    Answer: (A) 1 only
    Explanation

    Option a is the correct 1 is correct: The NCDEX is the farm derivative exchange. It is an online based in 2 is incorrect: NCDEX launched India's future trading index 3 is incorrect: SEBI permitted following institutional investors in the market: Category HI Alternative Eligible Foreign Entities (EFEs); Mutual Funds Managers

31. #71Practice set
    Which of the following were for of Farmer Producer Company (FPO) in India when cooperatives were already functioning? 1. While cooperatives covered restricted areas, an FPO conducts operation in the entire country. 2. Unlike FPOs, the government holds veto power in case of cooperatives with respect to voting powers. 3. Unlike cooperatives, the shares of FPOs are tradable.Select the correct answer using the code given below
    • A1 and 2 only
    • B2 only
    • C2 and 3 only
    • D1, 2 and 3
    Answer: (A) 1 and 2 only
    Explanation

    Option a is the correct 1 is correct: The area of operation of limited to certain areas and is discretionary in nature. contrary, an FPO conducts its operation across of 2 is correct: In case of cooperatives, has one vote but Government and Registrar hold veto power. The cooperatives are to the extent of interference. On the other one member has one vote in case of FPO, having transaction with the company cannot Government control is only limited to 3 is incorrect: Shares of cooperatives Shares of FPOs are also not tradable only to members. The value of the should be done at par value

32. #72Practice set
    With reference to the land reforms in India, consider the following statements: 1. The Land Ceiling Acts imposed an upper limit on the amount of land that can be owned by an individual. 2. More productive land has a low ceiling limit whereas unproductive land has a higher ceiling limit. 3. In some states, the Land Ceiling Acts allowed a separate share for unmarried women.How many of the statements given above are correct?
    • AOnly one
    • BOnly two
    • CAll three
    • DNone
    Answer: (B) Only two
    Explanation

    Option bis the correct to the Land Ceilings Acts, the state was identify and take possession of surplus land (above limit) held by each household, and to landless families and households in other such as SCs and l is incorrect: The Land Ceiling Acts imposed limit on the amount of land that can be owned by family. Household and not the individual was to measure the land 2 is correct: The land ceiling varies from region depending on the kind of land, its productivity, such factors. Very productive land has a low unproductive dry land has a higher ceiling 3 is correct: There were many loopholes in Ceilings Act through which most landowners were escape from having their surplus land taken over by managed to divide the land among relatives including servants, in so-called 'benami rich farmers actually divorced their wives in order the provisions of the Land Ceiling Act, which separate share f

33. #73Practice set
    With reference the Essential Commodities Act, consider the following statements: 1. Commodities are considered as essential commodities only if their price has been doubled within a period of three months. 2. Stock limits shall be imposed on all the commodities identified as essential commodities. 3. Only central government can impose stock limits on specified commodities.How many of the statements given above are correct?
    • AOnly one
    • BOnly two
    • CAll three
    • DNone
    Answer: (D) None
    Explanation

    Option d is the correct l is incorrect: There is no specific essential commodities in the Essential 1955. Section states that an "essential a commodity specified in the Schedule of the Act. if it is satisfied that it is necessary to do so in interest, can notify an item as essential, in state 2 is incorrect: Not all essential covered under the stock limits and hoarding. purpose of terming a stock as hoarding the has to issue stock limits orders under the Any quantity of a commodity covered in the order violation of that order is termed as hoarding. If no are imposed, there is no question of hoarding in 3 is incorrect: The Essential Commodities enabled the state governments to impose stock restrict movement of essential commodities. are pressing reasons to arrest unfair price rise of commodity, the Union Government empowers and Union Territories, by way of under the EC Act, to decide stoc

34. #74Full-length test
    With reference to the capital market in India, which of the following statements best describes the term "Follow on Public offer (FP
    • AIt is a mechanism under which large investors exchange shares of different companies at a pre-agreed level
    • BA process of selling the shares of companies by promising buyers very high fixed returns in a short period of time
    • CA process of issuing shares by the company already listed in the stock exchange
    • DA process of issuing shares in the stock exchange by the listed company on behalf of the unlisted company
    Answer: (C) A process of issuing shares by the company already listed in the stock exchange
    Explanation

    Option c is the correct c is correct: A Follow-on Public Offer (FPO) process of raising funds by issuing shares in the by the listed company. Under this method, firm provides existing sh res to investors or sells

35. #75Full-length test
    With reference to Government Securities and bond market in India, consider the following statements: 1. Unlike the Central government, state governments cannot issue any type of dated securities to borrow from the market. 2. Gilt accounts are accounts maintained by authorized entities on behalf of investors who wish to invest in government securities. 3. Public Sector Undertakings (PSUs) in India are barred from issuing bonds in primary market. 4. Securities and Exchange Board of India (SEBI) acts as the clearing agency for government securities in India.How many of the above given statements are correct?
    • AOnly one
    • BOnly two
    • COnly three
    • DAll four
    Answer: (A) Only one
    Explanation

    Option a is the correct I is incorrect: In India, the Central both, treasury bills and bonds or dated the State Governments issue only bonds or which are called the State Development 2 is correct: In India, Gilt accounts are by authorized banks or financial institutions { behalf of investors who wish to invest in including Treasury Bills, Government Bonds, securities issued by the Reserve Bank of India (RBI) of the Government of 3 is incorrect: In addition to central and bonds can also. be issued by public such as PSUs. These entities may issue finance their capital expenditure, working or other financial 4 is incorrect: The Clearing Corporation of (CCIL) was set up in April, 2001 to provide and settlement functions for transactions G-Secs, Foreign Exchange and Derivative securities or G-secs, issued by RBI. The the public debt of the Indian government. Important Tips What are the Types

36. #76Full-length test
    In the context of stock exchange, the practice of "Front Running" occurs when an individual stockbroker/dealer
    • Apurchases a stock based on advance non-public information for his/her own benefit
    • Bobtains the most favourable market information to secure the best investment options for investors
    • Cbuys or sells an asset at a specified price on a future date
    • Duses their firm's account to make a trade instead of matching available bids and offers from others in the market
    Answer: (A) purchases a stock based on advance non-public information for his/her own benefit
    Explanation

    Option a is the correct a is correct: Front-running is a practice in individual dealer executes a trade for themselves non-public information regarding an expected that will affect the price of the mutual funds make a big order, some fund the same shares in their personal accounts the MFs' order. When MFs purchase in the price of the share is expected to go up. In t.he personal fund managers will benefit by the raise prices of purchased b is incorrect: The best execution that a dealer attempt to obtain the most market price on a security for a customer a c is incorrect: A forward contract is a between two parties to buy or sell an asset at price on a future d is incorrect: Trading ahead occurs when a uses their firm's account to make a trade instead available bids and offers from others in the market

37. #77Full-length test
    With reference to 'Alternate Investment Funds (AIF consider the following statements:i. They are privately pooled investment vehicles in India that collect funds from specific group of investors. 2. They offer a higher degree of flexibility than mutual funds as they invest in unlisted shares. 3. In India, Angel Funds and Social Venture Funds are kept outside the purview of AIFs by Securities and Exchange Board of India. 4. Profits earned from these funds are completely exempted from Capital Gain Tax to promote investments in capital intensive sector in India.How many of the above given statements are correct?
    • AOnly one
    • BOnly two
    • COnly three
    • DAll the four
    Answer: (B) Only two
    Explanation

    Option b is the correct 1 is correct: Alternative Investment Fund or any fund established or incorporated in India a privately pooled investment vehicle which from sophisticated investors, whether foreign, for investing it in accordance with a policy for the benefit of its 2 is correct: Alternative Investment a higher degree of flexibility than mutual funds invest in unlisted shares and also use shorting This allows AIFs to potentially earn higher traditional investment avenues, which are limited equities and debt securities. Mutual funds in India allowed to invest in listed securities such as and money market 3 is incorrect: Angel Funds and Social fall under the purview of AIFs in India and by the Securities and Exchange Board of 4 is incorrect: For Category I Category II, generated by the fund will be taxed at the hands investor and not by the fund business. Category is taxable at the

38. #78Full-length test
    Considerthe following statements regarding the Stockholm Conference (1972): 1. It adopted a declaration defining the term 'sustainable development'. 2. "The polluter must pa principle was endorsed during the Conference.Which of the statements given above is/ are correct?
    • A1 only
    • B2 only
    • CBoth 1 and 2
    • DNeither 1 nor 2
    Answer: (B) 2 only
    Explanation

    Option b is the correct 1972 United Nations Conference on the Stockholm was the first world conference to make a major issue. The participants adopted a principles for sound management of the includes the Stockholm Declaration and Action the Human I is incorrect: The term was not defined in the Stockholm was not even mentioned in the declaration. The the World Commission on Environment and Commission Report) of 1987 defined the term sustainable 2 is correct: The principle of "the pay" was highly endorsed during the While supporting the proposed during the Conference, many speakers endorsed of "the polluter must pay" as mentioned in of the report- Brief Summary of the General the final declaration did not adopt this principle

39. #79Full-length test
    When a convertible debenture is into equity shares, then which of the following are likely to happen? 1. Debenture holders will become the owner of the company. 2. Dividend will be paid instead of fixed interest. 3. Shareholders will get the refund only when all liabilities have been paid off in case. of liquidation.Select the correct answer from the codes given below
    • AOnly one
    • BOnly two
    • CAll three
    • DNone
    Answer: (A) Only one
    Explanation

    Option a is the correct 1 is incorrect. Indian Depository Receipts an instrument through which a foreign company Indian securities market for raising 2 is correct. It is denominated in Indian the form of a depository receipt created by a (custodian of securities registered with It is issued against the underlying equity of to enable foreign companies to raise funds from securities 3 is incorrect. IDRs involve currency risk underlying shares in another country. Fluctuations exchange rate could impact on the value of the Important Tips Indian Depository Receipts (IDR) A depository receipt is a transferable financial instrument or certificate issued by a bank to reflect the security of a foreign company's publicly traded securities that are exchanged on a local stock exchange. An IDR is a financial instrument that allows a foreign company to raise funds in India. An IDR is issued by a forei

40. #80Full-length test
    With reference to Depositary Receipts (DRs), consider the following statements: 1. These can only be issued by the Foreign Portfolio Investors. 2. These are an instrument to facilitate investment in shares of foreign companies. 3. It removes the need for a company to be listed on any stock exchange in the world.Which of the statements given above is/ are correct?
    • A1 and 2 only
    • B2 only
    • C2 and 3 only
    • D1 and 3 only
    Answer: (B) 2 only
    Explanation

    Option b is the correct Receipts (DRs) is a mechanism that in a, particular country to invest in listed including multinational companies. They holder the opportunity to hold an interest in in an overseas 1 is incorrect:, A depositary receipt (DR) is certificate issued by a bankrepresenting a foreign company traded on a local stock exchange Depositary Receipts (DRs) are issued by the domestic the target country which are connected with (called custodian banks) in the origin the. is correct: DRs are a negotiable instrument the investors of a target country to invest in and in a foreign company without trading on where the company is originally 3 is incorrect: The main principle behind DRs is that the residents of target countries, where wants to expand its investor base; do not have on foreign exchanges, where the shares of the are originally order to make this work, the company which wan

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