Financial Markets - 1 - Free MCQ Practice Test with solutions, Commerce

Primary and secondary markets complement each other. Primary market deals with the issue of new securities. That is, through the primary market a company raises capital directly from the borrowers. On the other hand, secondary market deals in the purchase and sale of the existing securities. That is, once the securities are issued in primary market, they are then traded in the secondary market. It is in this sense that both the markets complement each other.

The secondary market provides liquidity to financial assets by allowing existing securities (like stocks and bonds) to be bought and sold among investors, as opposed to the primary market where securities are first issued. This trading facilitates price discovery and liquidity, enabling investors to easily convert their investments into cash.

In this scenario, Mr. X is the beneficial owner of the shares because he has the economic rights to the dividends and benefits of ownership, even though the shares are registered in Mr. Y's name. The depository system allows for the separation of ownership (beneficial owner) from the title (registered owner), facilitating smoother transactions in the securities market.

The money market is a segment of the financial market where short-term financial instruments are traded. This includes call money (short-term funds with no collateral), certificates of deposits (time deposits with banks), and trade bills (commercial bills used in merchandise trade). All these instruments help in managing short-term liquidity needs of financial institutions.

Commercial paper is a short-term unsecured promissory note issued by companies to finance their short-term liabilities. It typically has a maturity period of 15 days to one year and is sold at a discount from the face value and redeemed at par. Thus, statement A is not true, as commercial paper is not a long-term financial instrument.

The primary market is indeed known as the new issues market, where securities are sold for the first time to investors. This assertion is true. However, the primary market does not deal with securities already traded in the market; that function belongs to the secondary market. Therefore, the reason is false.

The standard minimum investment and denomination multiple for treasury bills is ₹25,000; they are bought in multiples of this amount.

Maximum whole number of bills = floor(₹1,10,000 ÷ ₹25,000) = 4, because 4 × ₹25,000 = ₹1,00,000 and the remaining ₹10,000 is insufficient to buy another bill.

Therefore the correct answer is 4.

The unique order code is a number assigned to each transaction by the stock exchange, which helps in uniquely identifying and tracking each trade. It is an essential part of the trade confirmation process, ensuring the accuracy and integrity of trade data.

A Treasury Bill is a short-term debt obligation with a maturity of one year or less which enable investors to save their short-term surplus funds while reducing their market risk.

Money market instruments are short-term in nature. The maturity of these instruments is generally less than a year. The maturity of these securities can be as less as one day also.