Financial Markets MCQ Quiz in বাংলা - Objective Question with Answer for Financial Markets - বিনামূল্যে ডাউনলোড করুন [PDF]

The correct answer is  1, 2, and 3.

Key PointsDifferences between Money Market and Capital Market

• The Money Market primarily deals with short-term financial assets, typically those maturing in less than one year. This market is crucial for maintaining liquidity in the financial system.
• The Capital Market deals with medium and long-term financial assets, typically those maturing in more than one year. This market is essential for raising capital for long-term investments.
• Instruments in the Money Market include Treasury Bills, Commercial Paper, and Certificates of Deposit. These instruments are typically low-risk and highly liquid.
• Capital Market instruments include stocks, bonds, and debentures. These instruments are used by companies and governments to raise long-term funds.
• Given the above points, we can analyze each statement:
  • Statement 1: The Money Market primarily deals with short-term financial assets, while the Capital Market deals with medium and long-term financial assets. Hence, statement 1 is correct.
  • Statement 2: Instruments like Treasury Bills and Commercial Paper are part of the Money Market. Hence, statement 2 is correct.
  • Statement 3: Capital Market instruments include stocks, bonds, and debentures. Hence, statement 3 is correct.

Additional Information

• Money Market: It is a segment of the financial market where financial instruments with high liquidity and short maturities are traded. The main purpose of the Money Market is to facilitate the borrowing and lending of short-term funds.
  • Treasury Bills (T-Bills): Short-term debt instruments issued by the government to meet its immediate financial needs. They are considered one of the safest investments.
  • Commercial Paper: An unsecured, short-term debt instrument issued by corporations to finance their short-term liabilities.
  • Certificates of Deposit (CDs): Time deposits offered by banks with a fixed interest rate and maturity date, typically ranging from a few weeks to a year.
• Capital Market: It is a market for buying and selling equity and debt instruments. Capital markets channel savings and investment between suppliers of capital such as retail investors and institutional investors, and users of capital like businesses, government, and individuals.
  • Stocks: Shares of ownership in a corporation, providing shareholders with a claim on part of the company’s assets and earnings.
  • Bonds: Debt securities issued by corporations or governments to raise capital. Bondholders receive periodic interest payments and the return of principal at maturity.
  • Debentures: A type of long-term debt instrument that is not secured by physical assets or collateral. Debenture holders have a general claim on the assets of the issuer.
• Both markets play a crucial role in the overall financial system by providing avenues for raising funds and managing liquidity.

The correct answer is  offering a trading platform for new issues.

Key PointsFunctions of a Stock Exchange

• Providing liquidity: Stock exchanges ensure liquidity by allowing investors to easily buy and sell securities. This means that securities can be quickly converted into cash or vice versa. Hence, statement 1 is correct.
• Facilitating price discovery: Stock exchanges help in determining the price of securities based on supply and demand dynamics. They provide a transparent platform where buyers and sellers can interact, leading to the discovery of fair market prices. Hence, statement 2 is correct.
• Offering a trading platform for new issues: This is not a function of a stock exchange. New issues are typically handled in the primary market through Initial Public Offerings (IPOs) and not in the secondary market where stock exchanges operate. Hence, statement 3 is incorrect.
• Ensuring investor protection: Stock exchanges implement various regulations and monitoring mechanisms to protect investors from fraudulent activities and ensure fair trading practices. Hence, statement 4 is correct.

Additional Information

• Stock Exchange:
  • A Stock Exchange is a centralized platform where listed securities are traded. It plays a crucial role in the economy by providing a regulated and transparent environment for the trading of securities.
  • Examples of major stock exchanges include the New York Stock Exchange (NYSE), the London Stock Exchange (LSE), and the Bombay Stock Exchange (BSE).
• Primary Market vs. Secondary Market:
  • The Primary Market is where new securities are issued and sold for the first time, usually through Initial Public Offerings (IPOs).
  • The Secondary Market is where existing securities are traded among investors. The stock exchange is a key segment of the secondary market.
• Investor Protection:
  • Stock exchanges implement rules and regulations to protect investors from fraudulent activities and ensure that the market operates in a fair and orderly manner.
  • Regulatory bodies like the Securities and Exchange Commission (SEC) in the United States and the Securities and Exchange Board of India (SEBI) in India oversee these activities.

The correct answer is 50 companies.

Key PointsNifty Index in Indian Stock Market

• The Nifty, also known as Nifty 50, is one of the major stock indices in the Indian Stock Market.
• It is managed by the National Stock Exchange (NSE) of India.
• The Nifty 50 index tracks the price movements of the top 50 companies listed on the NSE.
• These companies are selected based on their market capitalization and liquidity.
• The Nifty 50 index represents the overall performance of the Indian equity market and is used as a benchmark by investors.
• It covers various sectors such as finance, information technology, consumer goods, and energy.
• The index is rebalanced semi-annually to ensure it accurately reflects the market conditions.
• Investors use the Nifty 50 index to gauge the overall market sentiment and make informed investment decisions.

Additional Information

• S&P BSE Sensex:
  • The S&P BSE Sensex is another major index in the Indian stock market, representing the performance of the top 30 companies listed on the Bombay Stock Exchange (BSE).
  • Like the Nifty 50, the Sensex is used to track the overall market trends and investor sentiment.
  • The Sensex includes companies from various sectors, providing a comprehensive view of the market.
• Capital Market:
  • The Capital Market is a financial market where long-term debt or equity-backed securities are bought and sold.
  • It includes the stock market and the bond market.
  • The capital market plays a crucial role in the economy by providing a platform for companies to raise capital and for investors to invest in profitable ventures.
• Market Capitalization:
  • Market capitalization is the total market value of a company's outstanding shares of stock.
  • It is calculated by multiplying the current market price of one share by the total number of outstanding shares.
  • Market capitalization is used to determine a company's size and investment risk.

The correct answer is 7 days to 1 year.

Key PointsMaturity Period for Certificates of Deposit (CDs) in India

• Certificates of Deposit (CDs) are a type of financial instrument issued by Scheduled Commercial Banks and Financial Institutions in India.
• They are primarily used to cater to short-term liquidity needs.
• The typical maturity period for a Certificate of Deposit in India ranges from 7 days to 1 year.
• These CDs are redeemed at par value and the minimum amount for issuance is ₹1 lakh.
• Early withdrawal of CDs incurs a penalty, making them less flexible for those needing immediate liquidity before maturity.

Additional Information

• Scheduled Commercial Banks in India are banks that adhere to the regulations and guidelines set by the Reserve Bank of India (RBI).
• Financial Institutions that issue CDs include various non-banking financial companies (NBFCs) that are also regulated by the RBI.
• Par Value refers to the face value of the CD, which is the amount that will be returned to the holder at maturity.
• The minimum amount for a CD is set at ₹1 lakh to ensure that these instruments cater to larger depositors and institutional investors.
• Short-term liquidity needs refer to the requirement for funds that can be accessed within a short period, typically less than a year.
• Penalty for early withdrawal ensures that funds remain invested for the intended period, providing stability to the financial institution's liquidity management.
• The RBI's guidelines on the maturity period help maintain a balanced liquidity environment in the financial market.

The correct answer is  28 days.

Key PointsTreasury Bills (T-Bills) in India

• Treasury Bills (T-Bills) are short-term debt instruments issued by the Reserve Bank of India (RBI) on behalf of the government to raise short-term funds.
• T-Bills are issued at a discount and are redeemed at their face value upon maturity.
• In India, T-Bills are available in different maturity periods: 91 days, 182 days, and 364 days.
• The 28-day maturity period is not available for T-Bills in India. Hence, statement is correct.

Additional Information

• Reserve Bank of India (RBI): The central bank of India, responsible for regulating the issue and supply of the Indian rupee and managing the country’s main payment systems.
• Discount and Face Value: T-Bills are issued at a discount to their face value, meaning they are sold for less than their face value. Upon maturity, the face value is paid to the holder, and the difference between the purchase price and the face value represents the interest earned.
• Purpose of T-Bills: They are used by the government to meet short-term liquidity requirements and manage the short-term cash flow mismatches.
• Investors in T-Bills: Typically, institutional investors such as banks, mutual funds, and insurance companies invest in T-Bills due to their short-term nature and low risk.
• Monetary Policy Tool: The RBI uses T-Bills as a tool for implementing monetary policy. By issuing T-Bills, the RBI can control the money supply in the economy.

The correct answer is  Issuing company.

Key PointsPrimary Market and Issuing Company

• The Primary Market, also known as the New Issue Market, is where new securities are issued for the first time.
• This market allows companies to raise capital by issuing new shares or bonds to investors.
• The price of the securities in the Primary Market is determined by the issuing company in consultation with investment bankers and underwriters.
• The issuing company sets the initial price based on various factors such as the company's financial health, market conditions, and investor demand.
• SEBI (Securities and Exchange Board of India) regulates the market to ensure transparency and protect investor interests but does not set the price of the securities.
• The Stock exchange is a platform where securities are traded in the Secondary Market, not where their prices are set initially.
• Investors participate in buying the securities but do not determine their initial price.

Additional Information

• SEBI (Securities and Exchange Board of India):
  • SEBI is the regulatory authority for the securities market in India.
  • It ensures that the market operates in a fair, transparent, and efficient manner.
  • It protects investor interests and promotes the development of the securities market.
• Stock Exchange:
  • It is a platform where previously issued securities are traded among investors.
  • The main functions include providing liquidity, price discovery, and ensuring transparency in transactions.
  • Examples include the BSE (Bombay Stock Exchange) and NSE (National Stock Exchange) in India.
• Investment Bankers and Underwriters:
  • They assist the issuing company in determining the price of the new securities.
  • They also help in marketing and selling the securities to investors.
  • Underwriters may guarantee the sale of the securities by purchasing any unsold shares themselves.
• Factors Affecting the Price of New Securities:
  • The financial health and performance of the issuing company.
  • Prevailing market conditions and investor sentiment.
  • Demand for the company's shares or bonds.
  • Economic indicators and trends.

The correct answer is  More than 1 year.

Key Points

• The Capital Market is designed to cater to the borrowing needs for medium and long-term projects.
• The primary instruments of the Capital Market include shares, debentures, bonds, and derivatives.
• These instruments help investors mobilize funds for growth and expansion projects.
• The minimum maturity period for these financial instruments is more than 1 year.

Additional Information

• Capital Market:
  • The Capital Market is a financial market where long-term debt or equity-backed securities are bought and sold.
  • It is crucial for economic development as it provides a platform for raising long-term funds.
  • Examples include the stock market and bond market.
• Shares:
  • Shares represent ownership in a company and entitle the shareholder to a portion of the company’s profits.
  • They can be traded on stock exchanges, providing liquidity to investors.
• Debentures:
  • Debentures are a type of long-term debt instrument used by companies to borrow money at a fixed rate of interest.
  • They are not secured by physical assets or collateral.
• Bonds:
  • Bonds are fixed-income instruments representing a loan made by an investor to a borrower (typically corporate or governmental).
  • Bonds are used by companies, municipalities, states, and sovereign governments to finance projects and operations.
• Derivatives:
  • Derivatives are financial contracts whose value is derived from an underlying asset, group of assets, or benchmark.
  • Common derivatives include futures, options, and swaps.