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Test: Financial Market- Case Based Type Questions- 2 - Commerce MCQ


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10 Questions MCQ Test Business Studies (BST) Class 12 - Test: Financial Market- Case Based Type Questions- 2

Test: Financial Market- Case Based Type Questions- 2 for Commerce 2024 is part of Business Studies (BST) Class 12 preparation. The Test: Financial Market- Case Based Type Questions- 2 questions and answers have been prepared according to the Commerce exam syllabus.The Test: Financial Market- Case Based Type Questions- 2 MCQs are made for Commerce 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Financial Market- Case Based Type Questions- 2 below.
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Test: Financial Market- Case Based Type Questions- 2 - Question 1

Direction: Read the following text and answer the questions given below:

ISQAA SOLAR Limited is searching for options to raise ₹ 20,000 crores from the primary market for diversification and modernisation of existing projects. It hired the services of a renowned financial consultancy firm, DHAN LAXMI PVT. LTD. to suggest options for the same. DHAN LAXMI PVT. LTD. suggested a list of options to the Board of Directors of the company. It was decided that for the immediate requirement of ₹ 1,500 crores, the company will give a privilege to existing shareholders to subscribe to a new issue of shares according to the terms and conditions of the company. ₹ 4,500 crores would be raised by allotment of securities to a consortium of financial institutions, instead of inviting subscription from the public by making a direct appeal to investors to raise capital. It was further decided to raise capital to the tune of ₹ 6,000 crores through an issuing house. All these options were accepted by the Board of Directors. The Board further decided to raise ₹ 8,000 crores through the online system of the stock exchange by entering into an agreement with the exchange.

Q. Identify the method of floatation of new issues in the primary market, not taken up by ISQAA SOLAR LTD. :

Detailed Solution for Test: Financial Market- Case Based Type Questions- 2 - Question 1
Offer through prospectus involves inviting subscription from the public through issue of prospectus.
Test: Financial Market- Case Based Type Questions- 2 - Question 2

Direction: Read the following text and answer the questions given below:

ISQAA SOLAR Limited is searching for options to raise ₹ 20,000 crores from the primary market for diversification and modernisation of existing projects. It hired the services of a renowned financial consultancy firm, DHAN LAXMI PVT. LTD. to suggest options for the same. DHAN LAXMI PVT. LTD. suggested a list of options to the Board of Directors of the company. It was decided that for the immediate requirement of ₹ 1,500 crores, the company will give a privilege to existing shareholders to subscribe to a new issue of shares according to the terms and conditions of the company. ₹ 4,500 crores would be raised by allotment of securities to a consortium of financial institutions, instead of inviting subscription from the public by making a direct appeal to investors to raise capital. It was further decided to raise capital to the tune of ₹ 6,000 crores through an issuing house. All these options were accepted by the Board of Directors. The Board further decided to raise ₹ 8,000 crores through the online system of the stock exchange by entering into an agreement with the exchange.

Q. Identify the reason which has made the firm raise funds from the institutional investors :

Detailed Solution for Test: Financial Market- Case Based Type Questions- 2 - Question 2
The reason which has made the firm raise funds from the institutional investors are:
  • It helps to raise funds quickly.

  • It is not expensive.

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Test: Financial Market- Case Based Type Questions- 2 - Question 3

Direction: Read the following text and answer the questions given below:

“Usually, money market funds are recommended to investors with an investment horizon of 90- 365 days. These schemes can help you diversify your portfolio and help invest surplus cash while maintaining liquidity. It is a good option for retail investors with smaller investment amounts. Ensure that you invest according to your investment plan.”

After reading this article in a magazine, Ramesh who needs funds for his venture decided to buy a financial asset from the RBI. This financial asset is an instrument of short-term borrowing. He decided to buy it because he doesn’t want to take risk and wants an assured return. This instrument is a promissory note. It is highly liquid. This instrument is also known as Zero Coupon Bond. On this instrument is written T-91. Investment in this instrument started with just ₹ 25,000. For a higher value it is given in the multiples of ₹ 25,000.

Q. What is the minimum amount for which this instrument is available?

Detailed Solution for Test: Financial Market- Case Based Type Questions- 2 - Question 3
The minimum amount for which this instrument is available is ₹ 25,000.
Test: Financial Market- Case Based Type Questions- 2 - Question 4

Direction: Read the following text and answer the questions given below:

“Usually, money market funds are recommended to investors with an investment horizon of 90- 365 days. These schemes can help you diversify your portfolio and help invest surplus cash while maintaining liquidity. It is a good option for retail investors with smaller investment amounts. Ensure that you invest according to your investment plan.”

After reading this article in a magazine, Ramesh who needs funds for his venture decided to buy a financial asset from the RBI. This financial asset is an instrument of short-term borrowing. He decided to buy it because he doesn’t want to take risk and wants an assured return. This instrument is a promissory note. It is highly liquid. This instrument is also known as Zero Coupon Bond. On this instrument is written T-91. Investment in this instrument started with just ₹ 25,000. For a higher value it is given in the multiples of ₹ 25,000.

Q. On whose behalf does the RBI issue this instrument?

Detailed Solution for Test: Financial Market- Case Based Type Questions- 2 - Question 4
These are money market instruments issued by the Reserve bank of India (RBI) acting on the behalf of the central government (Government of India). These bills are issued when there is a shortage of funds, or when the RBI wants to control the cash liquidity in the market.
Test: Financial Market- Case Based Type Questions- 2 - Question 5

Direction: Read the following text and answer the questions given below:

“Usually, money market funds are recommended to investors with an investment horizon of 90- 365 days. These schemes can help you diversify your portfolio and help invest surplus cash while maintaining liquidity. It is a good option for retail investors with smaller investment amounts. Ensure that you invest according to your investment plan.”

After reading this article in a magazine, Ramesh who needs funds for his venture decided to buy a financial asset from the RBI. This financial asset is an instrument of short-term borrowing. He decided to buy it because he doesn’t want to take risk and wants an assured return. This instrument is a promissory note. It is highly liquid. This instrument is also known as Zero Coupon Bond. On this instrument is written T-91. Investment in this instrument started with just ₹ 25,000. For a higher value it is given in the multiples of ₹ 25,000.

Q. Which financial asset is indicated in the above case?

Detailed Solution for Test: Financial Market- Case Based Type Questions- 2 - Question 5
A Treasury bill is basically an instrument of short-term borrowing by the Government of India maturing in less than one year. Treasury bills are issued in the form of a promissory note. They are highly liquid and have assured yield and negligible risk of default.
Test: Financial Market- Case Based Type Questions- 2 - Question 6

Direction: Read the following text and answer the questions given below:

“Usually, money market funds are recommended to investors with an investment horizon of 90- 365 days. These schemes can help you diversify your portfolio and help invest surplus cash while maintaining liquidity. It is a good option for retail investors with smaller investment amounts. Ensure that you invest according to your investment plan.”

After reading this article in a magazine, Ramesh who needs funds for his venture decided to buy a financial asset from the RBI. This financial asset is an instrument of short-term borrowing. He decided to buy it because he doesn’t want to take risk and wants an assured return. This instrument is a promissory note. It is highly liquid. This instrument is also known as Zero Coupon Bond. On this instrument is written T-91. Investment in this instrument started with just ₹ 25,000. For a higher value it is given in the multiples of ₹ 25,000.

Q. What does T-91 denote here?

Detailed Solution for Test: Financial Market- Case Based Type Questions- 2 - Question 6
T-91 here denotes the maturity period of the Treasury bill which is here 91 days.
Test: Financial Market- Case Based Type Questions- 2 - Question 7

Direction: Read the following text and answer the questions given below:

Rajni Auto Manufacturers has been into business for the last 30 years and have decided to give a special privilege to their existing shareholders to subscribe to the new issue of shares where they will be given shares according to the proportion of shares held by them. The company always gives special treatment to its loyal stakeholders and also ensures that they remain associated with the organization for longer durations. Last year, the company was successfully dealing through the capital market where both the buying and selling of securities were taking place. The owner of the company is a man of ethical business. He often contributes to business magazines by writing articles and editorials. He recently wrote an article about the watchdog of stock market. The article gained a lot of popularity and now is part of the curriculum of MBA students.

Q. Identify regulatory functions of the organization identified above?

Detailed Solution for Test: Financial Market- Case Based Type Questions- 2 - Question 7

The correct answer is Option 3: Promotion of ethical and fair practices. The owner of Rajni Auto Manufacturers is a man of ethical business, and he often contributes to business magazines by writing articles and editorials. He recently wrote an article about the watchdog of stock market, which gained a lot of popularity and is now part of the curriculum of MBA students. This shows that the organization is promoting ethical and fair practices, which is one of the regulatory functions of the organization.

Test: Financial Market- Case Based Type Questions- 2 - Question 8

Direction: Read the following text and answer the questions given below:

Rajni Auto Manufacturers has been into business for the last 30 years and have decided to give a special privilege to their existing shareholders to subscribe to the new issue of shares where they will be given shares according to the proportion of shares held by them. The company always gives special treatment to its loyal stakeholders and also ensures that they remain associated with the organization for longer durations. Last year, the company was successfully dealing through the capital market where both the buying and selling of securities were taking place. The owner of the company is a man of ethical business. He often contributes to business magazines by writing articles and editorials. He recently wrote an article about the watchdog of stock market. The article gained a lot of popularity and now is part of the curriculum of MBA students.

Q. Which type of capital market was this company dealing in?

Detailed Solution for Test: Financial Market- Case Based Type Questions- 2 - Question 8

The correct answer is Option 2: Secondary market. Rajni Auto Manufacturers was dealing in the secondary capital market, which is where existing securities are traded between investors. The company was giving special privileges to its existing shareholders to subscribe to the new issue of shares, which is a common practice in the secondary market. The owner of the company also wrote an article about the watchdog of stock market, which is also a common practice in the secondary capital market.

Test: Financial Market- Case Based Type Questions- 2 - Question 9

Direction: Read the following text and answer the questions given below:

Rajni Auto Manufacturers has been into business for the last 30 years and have decided to give a special privilege to their existing shareholders to subscribe to the new issue of shares where they will be given shares according to the proportion of shares held by them. The company always gives special treatment to its loyal stakeholders and also ensures that they remain associated with the organization for longer durations. Last year, the company was successfully dealing through the capital market where both the buying and selling of securities were taking place. The owner of the company is a man of ethical business. He often contributes to business magazines by writing articles and editorials. He recently wrote an article about the watchdog of stock market. The article gained a lot of popularity and now is part of the curriculum of MBA students.

Q. Which method of floatation was used by Rajni Auto Manufacturers?

Detailed Solution for Test: Financial Market- Case Based Type Questions- 2 - Question 9
Rights Issue is a privilege given to existing shareholders to subscribe to a new issue of shares according to the terms and conditions of the company. The shareholders are offered the ‘right’ to buy new shares in proportion to the number of shares they already possess.
Test: Financial Market- Case Based Type Questions- 2 - Question 10

Direction: Read the following text and answer the questions given below:

Rajni Auto Manufacturers has been into business for the last 30 years and have decided to give a special privilege to their existing shareholders to subscribe to the new issue of shares where they will be given shares according to the proportion of shares held by them. The company always gives special treatment to its loyal stakeholders and also ensures that they remain associated with the organization for longer durations. Last year, the company was successfully dealing through the capital market where both the buying and selling of securities were taking place. The owner of the company is a man of ethical business. He often contributes to business magazines by writing articles and editorials. He recently wrote an article about the watchdog of stock market. The article gained a lot of popularity and now is part of the curriculum of MBA students.

Q. Which watchdog of the capital market has been referred to in the above case?

Detailed Solution for Test: Financial Market- Case Based Type Questions- 2 - Question 10
SEBI is a statutory regulatory body established on the 12th of April, 1992. It monitors and regulates the Indian capital and securities market while ensuring to protect the interests of the investors, formulating regulations and guidelines.
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