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Test: Financial Markets - 1 - Commerce MCQ


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10 Questions MCQ Test Business Studies (BST) Class 12 - Test: Financial Markets - 1

Test: Financial Markets - 1 for Commerce 2024 is part of Business Studies (BST) Class 12 preparation. The Test: Financial Markets - 1 questions and answers have been prepared according to the Commerce exam syllabus.The Test: Financial Markets - 1 MCQs are made for Commerce 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Financial Markets - 1 below.
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Test: Financial Markets - 1 - Question 1

This a MCQ (Multiple Choice Question) based practice test of Chapter 10 - Financial Markets of Business Studies of Class XII (12) for the quick revision/preparation of School Board examinations

Q  Primary and secondary markets:

Detailed Solution for Test: Financial Markets - 1 - Question 1

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.

Test: Financial Markets - 1 - Question 2

One of the functions of ‘financial market is “providing liquidity to financial assets.”

Detailed Solution for Test: Financial Markets - 1 - Question 2

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.

Test: Financial Markets - 1 - Question 3

Mr. X bought certain shares of Reliance Ltd. from Mr. Y and lodged them with the depository in form of a book entry. However, as per the register of members of Reliance Ltd., Mr. Y is still the owner of those shares. In such a situation, Mr. X would be known as

Detailed Solution for Test: Financial Markets - 1 - Question 3

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.

Test: Financial Markets - 1 - Question 4

Which of the following are the instruments of money market?

Detailed Solution for Test: Financial Markets - 1 - Question 4

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.

Test: Financial Markets - 1 - Question 5

Which of the following statements is not true with regard to Commercial paper?

Detailed Solution for Test: Financial Markets - 1 - Question 5

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.

Test: Financial Markets - 1 - Question 6

Assertion (A): Primary market is also known as the new issues market
Reason (R): Primary market deals with the securities already traded in market.

Detailed Solution for Test: Financial Markets - 1 - Question 6

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.

Test: Financial Markets - 1 - Question 7

Raj Enterprises wishes to invest ₹1,10,000 in treasury bills. What is the maximum number of treasury bills it can buy with this fund?

Detailed Solution for Test: Financial Markets - 1 - Question 7

Without specific information on the denomination or price of the treasury bills, it's challenging to calculate the exact number of treasury bills Raj Enterprises can purchase. Typically, treasury bills are issued in standard denominations, and investors buy them at a discount to face value. The answer provided assumes a specific context or denomination, but in reality, this would depend on the available denominations and the current discount rates of treasury bills.

Test: Financial Markets - 1 - Question 8

________________ is a number assigned to each transaction by the stock exchange and is printed on the contract note.

Detailed Solution for Test: Financial Markets - 1 - Question 8

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.

Test: Financial Markets - 1 - Question 9

A Treasury Bill is basically:

Detailed Solution for Test: Financial Markets - 1 - Question 9

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.

Test: Financial Markets - 1 - Question 10

Instruments with a maturity period of less than one year are traded in ____

Detailed Solution for Test: Financial Markets - 1 - Question 10

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.

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