What is the primary purpose of an Initial Public Offering (IPO)?

To facilitate the trading of existing shares

To raise capital from the general public

To diversify the equity base of a company

To reduce the risk associated with investing in stocks

What distinguishes a Follow-on Public Offering (FPO) from an IPO?

FPOs are less risky for investors.

IPOs involve the sale of existing shares.

FPOs are the first public issue of a company.

IPOs are always done by publicly listed companies.

Which organization regulates and sets guidelines for Initial Public Offerings (IPOs) in India?

Securities and Exchange Board of India (SEBI)

Ministry of Finance, Government of India

What is the main function of a clearing house in the stock market?

To buy and sell stocks on behalf of investors

To record changes of ownership of shares

To ensure the orderly settlement of trades

To provide investment advice to shareholders

What is the significance of stock indices in the financial markets?

Stock indices represent the entire stock market.

Stock indices help investors select individual stocks.

Stock indices reflect the sentiment of a single investor.

Stock indices are used for trading foreign currencies.

What is the primary purpose of creating stock indices?

To provide investment advice to individual investors

To facilitate passive investment strategies

To eliminate the need for stock trading

To encourage speculative trading

What does market capitalization-weighted index mean?

It assigns equal weight to all stocks in the index.

It gives more weight to stocks with higher market capitalization.

It calculates the index value based on dividend yields.

It is a type of index used for commodities.

How is the value of a price-weighted stock index calculated?

It is calculated based on the market capitalization of each stock.

It is calculated as a simple average of stock prices.

It is calculated based on the total number of shares traded.

It is calculated using the dividend yield of each stock.

What is the significance of using free-float market capitalization in index calculation?

It increases the weight of illiquid stocks in the index.

It considers only the publicly available shares for calculation.

It excludes all stocks from the index calculation.

It results in higher volatility in the index.

How do stock indices reflect investor sentiment?

They directly influence investor decisions.

They track the trading activity of a single investor.

They provide a snapshot of overall market sentiment.

They determine the price of individual stocks.

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