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Test: Financial Market- Case Based Type Questions- 1 - Commerce MCQ


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10 Questions MCQ Test - Test: Financial Market- Case Based Type Questions- 1

Test: Financial Market- Case Based Type Questions- 1 for Commerce 2024 is part of Commerce preparation. The Test: Financial Market- Case Based Type Questions- 1 questions and answers have been prepared according to the Commerce exam syllabus.The Test: Financial Market- Case Based Type Questions- 1 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- 1 below.
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Test: Financial Market- Case Based Type Questions- 1 - Question 1

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

“Unicon Securities Pvt. Ltd.” was established to deal in securities. It was registered as a stockbroker with National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) to trade in securities listed at these exchanges. It is also a depository participant with CDSL and NSDL. In the first three years, it developed its business successfully. After that, the composition of Board of Directors changed. Some customers complained to the customer care centre of the company that shares purchased by them and for which the payment has been duly made, were not transferred to their Demat Accounts by “Unicon Securities Pvt. Ltd.”. The executive of customer care centre promised the aggrieved customers that their shares will be transferred to their respective Demat Accounts very soon. But the company delayed the matter and didn’t transfer the shares of the customers to their Demat Accounts. This eroded investors’ confidence and multiplied their grievances. On regular inspection and by conducting enquiries of the brokers involved, the Securities and Exchange Board of India (SEBI) was able to detect this irregularity.

Q. Identify the function of SEBI being stated in paragraph.

Detailed Solution for Test: Financial Market- Case Based Type Questions- 1 - Question 1
Regulatory functions involve establishment of rules and regulations for the financial intermediaries along with corporate that helps in efficient management of the market.
Test: Financial Market- Case Based Type Questions- 1 - Question 2

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

“Unicon Securities Pvt. Ltd.” was established to deal in securities. It was registered as a stockbroker with National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) to trade in securities listed at these exchanges. It is also a depository participant with CDSL and NSDL. In the first three years, it developed its business successfully. After that, the composition of Board of Directors changed. Some customers complained to the customer care centre of the company that shares purchased by them and for which the payment has been duly made, were not transferred to their Demat Accounts by “Unicon Securities Pvt. Ltd.”. The executive of customer care centre promised the aggrieved customers that their shares will be transferred to their respective Demat Accounts very soon. But the company delayed the matter and didn’t transfer the shares of the customers to their Demat Accounts. This eroded investors’ confidence and multiplied their grievances. On regular inspection and by conducting enquiries of the brokers involved, the Securities and Exchange Board of India (SEBI) was able to detect this irregularity.

Q. Which apex statutory body of capital market inspected and conducted enquiries in order to detect irregularities?

Detailed Solution for Test: Financial Market- Case Based Type Questions- 1 - Question 2
The Securities and Exchange Board of India is the regulatory body for securities and commodity market in India under the jurisdiction of Ministry of Finance, Government of India.
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Test: Financial Market- Case Based Type Questions- 1 - Question 3

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

“Unicon Securities Pvt. Ltd.” was established to deal in securities. It was registered as a stockbroker with National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) to trade in securities listed at these exchanges. It is also a depository participant with CDSL and NSDL. In the first three years, it developed its business successfully. After that, the composition of Board of Directors changed. Some customers complained to the customer care centre of the company that shares purchased by them and for which the payment has been duly made, were not transferred to their Demat Accounts by “Unicon Securities Pvt. Ltd.”. The executive of customer care centre promised the aggrieved customers that their shares will be transferred to their respective Demat Accounts very soon. But the company delayed the matter and didn’t transfer the shares of the customers to their Demat Accounts. This eroded investors’ confidence and multiplied their grievances. On regular inspection and by conducting enquiries of the brokers involved, the Securities and Exchange Board of India (SEBI) was able to detect this irregularity.

Q. Identify the step of trading procedure in a stock exchange which has not been followed by “Unicon Securities Pvt. Ltd.”.

Detailed Solution for Test: Financial Market- Case Based Type Questions- 1 - Question 3
A settlement is a colony or any small community of people. This can be a community that's smaller than a town, like a village. Also, if one country establishes a colony somewhere else, that can be called a settlement. The other kind of settlement happens when something is settled, like the end of a disagreement.
Test: Financial Market- Case Based Type Questions- 1 - Question 4

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

“Unicon Securities Pvt. Ltd.” was established to deal in securities. It was registered as a stockbroker with National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) to trade in securities listed at these exchanges. It is also a depository participant with CDSL and NSDL. In the first three years, it developed its business successfully. After that, the composition of Board of Directors changed. Some customers complained to the customer care centre of the company that shares purchased by them and for which the payment has been duly made, were not transferred to their Demat Accounts by “Unicon Securities Pvt. Ltd.”. The executive of customer care centre promised the aggrieved customers that their shares will be transferred to their respective Demat Accounts very soon. But the company delayed the matter and didn’t transfer the shares of the customers to their Demat Accounts. This eroded investors’ confidence and multiplied their grievances. On regular inspection and by conducting enquiries of the brokers involved, the Securities and Exchange Board of India (SEBI) was able to detect this irregularity.

Q. By not converting and transferring the shares to the investors’ Demat Account, i.e., electronic form, which process was not followed?

Detailed Solution for Test: Financial Market- Case Based Type Questions- 1 - Question 4
Dematerialisation is the process by which a client can get physical certificates converted into electronic balances. An investor intending to dematerialise its securities needs to have an account with a DP. Holdings in only those securities that are admitted for dematerialisation by NSDL can be dematerialised.
Test: Financial Market- Case Based Type Questions- 1 - Question 5

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

Rajesh is the CEO of a leading petrochemical company. Recently, the company issued share capital to cover some expenses. However, in order to meet the floating cost of issuing shares, the company decided to conduct Bridge Financing. Therefore, it decided to issue a money market tool. The CEO’s decision wisely met the company’s requirements. Three months later, the company decided to issue new shares in the primary market again. According to the floating method it involves, it decided to adopt the method mainly adopted by listed companies and attract the masses by directly contacting the public. Again, success came from the company’s approach and the realization of its goals. However, when the company tried the same type again three months later, the company encountered many problems. The problem is to determine a key aspect related to the security of the new release. If the same process is carried out in the secondary market, the company will not care too much about this key aspect.

Q. What key aspect the company would not have cared about in the secondary market?

Detailed Solution for Test: Financial Market- Case Based Type Questions- 1 - Question 5

The price of a security reflects the value of the asset underlying it. Therefore, the market price for a security indicates the consensus value placed on its asset by all the buyers and sellers in the market. It is the result of the valuation of the asset.

Test: Financial Market- Case Based Type Questions- 1 - Question 6

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

Rajesh is the CEO of a leading petrochemical company. Recently, the company issued share capital to cover some expenses. However, in order to meet the floating cost of issuing shares, the company decided to conduct Bridge Financing. Therefore, it decided to issue a money market tool. The CEO’s decision wisely met the company’s requirements. Three months later, the company decided to issue new shares in the primary market again. According to the floating method it involves, it decided to adopt the method mainly adopted by listed companies and attract the masses by directly contacting the public. Again, success came from the company’s approach and the realization of its goals. However, when the company tried the same type again three months later, the company encountered many problems. The problem is to determine a key aspect related to the security of the new release. If the same process is carried out in the secondary market, the company will not care too much about this key aspect.

Q. Which method of floatation was adopted by the company three months later?

Detailed Solution for Test: Financial Market- Case Based Type Questions- 1 - Question 6

A prospectus is a formal document that is required by and filed with the Securities and Exchange Commission (SEC) that provides details about an investment offering to the public. A prospectus is filed for offerings of stocks, bonds, and mutual funds.

Test: Financial Market- Case Based Type Questions- 1 - Question 7

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

Rajesh is the CEO of a leading petrochemical company. Recently, the company issued share capital to cover some expenses. However, in order to meet the floating cost of issuing shares, the company decided to conduct Bridge Financing. Therefore, it decided to issue a money market tool. The CEO’s decision wisely met the company’s requirements. Three months later, the company decided to issue new shares in the primary market again. According to the floating method it involves, it decided to adopt the method mainly adopted by listed companies and attract the masses by directly contacting the public. Again, success came from the company’s approach and the realization of its goals. However, when the company tried the same type again three months later, the company encountered many problems. The problem is to determine a key aspect related to the security of the new release. If the same process is carried out in the secondary market, the company will not care too much about this key aspect.

Q. Which type of money market instrument was issued by the company in the earlier part?

Detailed Solution for Test: Financial Market- Case Based Type Questions- 1 - Question 7

Commercial paper is a short term unsecured promissory note, negotiable and transferable by endorsement and delivery with a fixed maturity period. It is issued by large and creditworthy companies to raise short-term funds at lower rates of interest than market rates.

Test: Financial Market- Case Based Type Questions- 1 - Question 8

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

Rajesh is the CEO of a leading petrochemical company. Recently, the company issued share capital to cover some expenses. However, in order to meet the floating cost of issuing shares, the company decided to conduct Bridge Financing. Therefore, it decided to issue a money market tool. The CEO’s decision wisely met the company’s requirements. Three months later, the company decided to issue new shares in the primary market again. According to the floating method it involves, it decided to adopt the method mainly adopted by listed companies and attract the masses by directly contacting the public. Again, success came from the company’s approach and the realization of its goals. However, when the company tried the same type again three months later, the company encountered many problems. The problem is to determine a key aspect related to the security of the new release. If the same process is carried out in the secondary market, the company will not care too much about this key aspect.

Q. When the company repeated the same process again after three months, it faced problem in:

Detailed Solution for Test: Financial Market- Case Based Type Questions- 1 - Question 8
The primary market refers to the market where securities are created and first issued, while the secondary market is one in which they are traded afterward among investors. For example, U.S. Treasuries—the bonds, bills, and notes issued by the U.S. government.
Test: Financial Market- Case Based Type Questions- 1 - Question 9

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. How much money was raised by the company through E-IPO’s?

Detailed Solution for Test: Financial Market- Case Based Type Questions- 1 - Question 9
₹ 8,000 crores money was raised by the company through E-IPO’s.
Test: Financial Market- Case Based Type Questions- 1 - Question 10

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. “₹ 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.’’ Identify the method of floatation of new issues in the primary market being discussed above, which the company has decided to use :

Detailed Solution for Test: Financial Market- Case Based Type Questions- 1 - Question 10
Private placement is the allotment of securities by a company to institutional investors and some selected individuals. It helps to raise capital more quickly than a public issue.
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