Capital Market deals with medium and Long Term Funds. Capital Market is a market dealing in medium and long-term funds. It is an institutional arrangement for borrowing medium and long-term funds and which provides facilities for marketing and trading of securities.
2. In Secondary segment of Capital Market ____________
Fresh Capital is raised
Trading of outstanding securities is done
Both a & b
None of the above
Answer.2. Trading of outstanding securities is done
Explanation:
In the Secondary segment of the Capital Market trading of outstanding securities is done.
Capital market consists of primary markets and secondary markets. Primary markets deal with trade of new issues of stocks and other securities, whereas secondary market deals with the exchange of existing or previously-issued securities.
3. Which of the following is a role of the Capital Market?
Capital Formation
Promotion of Industrial Growth
Development of backward areas of the country
All of the Above
Answer.4. All of the Above
Explanation:
The primary role of the capital market is to raise long-term funds for Governments, banks, and corporations while providing a platform for the trading of securities. The member organizations of the capital market may issue stocks and bonds in order to raise funds.
The role of the Capital Market is
Capital Formation
Promotion of Industrial Growth
Development of backward areas of the country
4. Funds can be raised in Primary Market through
Public Issue by Prospectus
Private Placements
Rights Issues
All of the Above
Answer.4. All of the Above
Explanation:
Funds can be raised in Primary Market through
Public Issue by Prospectus
Private Placements
Rights Issues
Public Issue:- This is the most common way to issue securities to the general public. Through an IPO, the company is able to raise funds. The securities are listed on a stock exchange for trading purposes.
Rights Issue:- When a company wants to raise more capital from existing shareholders, it may offer the shareholders more shares at a price discounted from the prevailing market price. The number of shares offered is on a pro-rata basis. This process is known as a Rights Issue.
Preferential Allotment:- When a listed company issues shares to a few individuals at a price that may or may not be related to the market price, it is termed a preferential allotment. The company decides the basis of allotment and it is not dependent on any mechanism such as pro-rata or anything else.z
5. Primary Market is a market for:
New securities Issues
Outstanding Securities
Land Records
None of the above
Answer.1. New Issues
Explanation:
The primary market is the financial market where new securities are issued and become available for trading by individuals and institutions. The trading activities of the capital markets are separated into the primary market and secondary market.
6. When an organization opts to convert private capital into public capital, it is called _________
Going Out
Being Open
Being Listed
Going Public
Answer.4. Going Public
Explanation:
When an organization opts to convert private capital into public capital, it is called going Public. Going public refers to a private company’s initial public offering (IPO), thus becoming a publicly-traded and owned entity. Going public increases the prestige and helps a company raise capital to invest in future operations, expansion, or acquisitions.
7. Bonus Shares enable the company to restructure its capital.
True
False
Either 1 or 2
None
Answer.1. True
Explanation:
Bonus shares may also be issued to restructure company reserves. Issuing bonus shares does not involve cash flow. It increases the company’s share capital but not its net assets. Bonus shares increase a company’s share capital.
8. Which of the following enables issuers to reap benefits arising from price and demand discovery?
Public Issue by Prospectus
Book Building
Listing
None of the above
Answer.2. Book Building
Explanation:
Book Building enables issuers to reap benefits arising from price and demand discovery.
Book Building is the process by which an underwriter determines the price at which the shares must be sold in an Initial Public Offer (IPO). The process of price discovery requires the underwriter to call forth bids from various institutional investors such as fund managers and others.
9. Which one of the following is not a feature of a Stock Exchange?
Organized Market
Dealing only Through Authorised Members
Necessary to remain present physically for dealing
Necessary to obey Rules and Bye-laws
Answer.3. Necessary to remain present physically for dealing
Explanation:
Necessary to remain present physically for dealing is not a feature of a Stock Exchange.
4 main features of stock exchange are as follows:
Organized Market
Dealing only Through Authorised Members
Dealings in Securities Issued by Various Concerns:
Necessary to obey Rules and Bye-laws
10. SENSEX is an Index of which Stock Exchange?.
NSE
OTCEI
MCX
BSE
Answer.4. BSE
Explanation:
The term Sensex refers to the benchmark index of the BSE (Bombay Stock Exchange) in India. The Sensex is comprised of 30 of the largest and most actively traded stocks on the BSE and provides a gauge of India’s economy. It is float-adjusted and market-capitalization-weighted.
11. Inclusion of a security in the official list of a stock exchange is called _________ and for that the company has to apply with ___________.
Listing, Managing Committee of Stock Exchange
Enrollment, Managing Committee of Stock Exchange
Listing, Board of Directors of Stock Exchange
Registration, ROC
Answer.1. Listing, Managing Committee of Stock Exchange
Explanation:
Inclusion of a security in the official list of a stock exchange is called listing and for that, the company has to apply with the managing committee of the Stock Exchange.
12. ____________ was set up as a strong need was felt to protect the interest of investors and to have a systematic and organized working of the securities market in India.
Bombay Stock Exchange
National Stock Exchange
Over the Counter Exchange of India
Securities and Exchange Board of India
Answer.1. Securities and Exchange Board of India
Explanation:
Securities and Exchange Board of India (SEBI) was set up as a strong need was felt to protect the interest of investors and to have a systematic and organized working of the securities market in India.
SEBI is a statutory body and a market regulator, which controls the securities market in India. The basic functions of the Sebi are to protect the interests of investors in securities and to promote and regulate the securities market.
13. Collateral value of eligible Listed Securities is considered on
Average market price
Marked to market basis
The reputation of the promoters
None of the above
Answer.2. Marked to market basis
Explanation:
The collateral value of eligible Listed Securities is considered on a Marked to market basis. The term collateral value refers to the fair market value of the assets used to secure a loan. Collateral value is typically determined by looking at the recent sale prices of similar assets or having the asset appraised by a qualified expert.
Mark to market is an accounting practice that involves adjusting the value of an asset to reflect its value as determined by current market conditions.
14. SBTS stands for
Securities Buying and Trading Society
Software Based Trading Services
Selling and buying through the screen
Screen-Based Trading System
Answer.4. Screen-Based Trading System
Explanation:
SBTS stands for Screen-Based Trading System. In (SBTS) a member can punch into the computer the quantities of shares and the prices at which he wants to transact. The on-line trading system of BSE is known as BOLT. BOLT is a screen-based automated trading platform.
15. Which is a means to reduce the floating equity stock in the market?
Sell off
Negotiate
Buy Back
All of the above
Answer.3. Buy Back
Explanation:
Buy Back means to reduce the floating equity stock in the market.
Buy-Back is a corporate action in which a company buys back its shares from the existing shareholders usually at a price higher than market price. When it buys back, the number of shares outstanding in the market reduces.
Buy back is a tool to increase the wealth of the shareholders. With share buy back, a reduction in the floating stock of the company takes place, which improves the earnings per share (EPS) which, in turn, increases the market price of the share. At high market prices, a company can come out with new issues at a premium and thereby lower its cost of capital.
