MCQ
Financial Markets MCQ - Practice Questions with Answers
Solve 96 Financial Markets questions for RAS/RPSC preparation.
Practice questions
Q1Consider the following statements: 1. Treasury bills are zero-coupon securities. 2. Treasury bills pay no interest. 3. Treasury bills are issued at a discount and redeemed at face value at maturity. Which of the statements given above are correct?
All three statements are true. RBI states that Treasury bills are zero-coupon securities, pay no interest, and are issued at a discount while being redeemed at face value on maturity.
Q2Consider the following statements: 1. Equity shares represent a share of ownership in a company. 2. Debt securities represent money borrowed by a company or institution from an investor and must be repaid. 3. Derivatives are financial instruments whose value is independent of any other asset. Which of the statements given above are correct?
Statement 1 is correct: equity shares represent ownership. Statement 2 is correct: debt securities represent borrowed money that must be repaid. Statement 3 is incorrect because derivatives derive value from another asset such as shares, debt securities or commodities.
Q3Consider the following statements: 1. BSE Ltd. was established in 1875. 2. BSE is Asia's first stock exchange. 3. BSE provides trading in equity, debt instruments, derivatives and mutual funds. Which of the statements given above are correct?
All three statements are correct. BSE's corporate profile says it was established in 1875, is Asia's first stock exchange, and provides trading in equity, debt instruments, derivatives and mutual funds.
Q4Consider the following statements: 1. Capital Indexed Bonds link the principal to an accepted inflation index. 2. A 5-year Capital Indexed Bond was first issued in December 1997 and matured in 2002. 3. Inflation Indexed Bonds protect both coupon flows and principal amounts against inflation. 4. Inflation Indexed Bonds linked to WPI were first issued in India in June 2003. Which of the statements given above are correct?
Statements 1, 2 and 3 are correct. Statement 4 is incorrect: WPI-linked Inflation Indexed Bonds were issued in India in June 2013, not June 2003.
Q5Consider the following statements: 1. Open Market Operations are conducted by RBI through sale or purchase of corporate shares. 2. When RBI sells securities under Open Market Operations, it sucks out rupee liquidity from the market. 3. When liquidity conditions are tight, RBI may buy securities from the market to release liquidity. Which of the statements given above are correct?
Statements 2 and 3 are correct. RBI explains that selling securities sucks out rupee liquidity, while buying securities releases liquidity when conditions are tight. Statement 1 is false because OMOs are sale or purchase of G-Secs, not corporate shares.
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More questions
6Consider the following statements: 1. Under the call money market, funds are transacted on an overnight basis. 2. Under the notice money market, funds are transacted on an overnight basis. 3. Under the notice money market, funds are transacted for 15 days to one year. Which of the statements given above are correct?
7Consider the following statements: 1. In the primary market, new issues of shares or other securities are offered to investors. 2. In the secondary market, investors buy securities directly from the issuer company. 3. Initial public offers for shares are examples of primary-market issues. Which of the statements given above are correct?
8Consider the following statements: 1. A Government Security is a tradable instrument issued by the Central Government or the State Governments. 2. Treasury Bills in India are presently issued in three tenors: 91 day, 182 day and 364 day. 3. State Governments in India issue Treasury Bills as well as dated securities. Which of the statements given above are correct?
9Consider the following statements: 1. The price of a fixed-rate G-Sec and its yield generally move in opposite directions. 2. Coupon yield is the measure that captures the effect of interest-rate movement and inflation on a G-Sec's return. 3. Current yield considers only coupon interest and ignores other sources of return that affect bond yield. 4. Yield to Maturity is calculated merely as the annual coupon divided by the face value of the bond. Which of the statements given above are correct?
10Consider the following statements: 1. Under SEBI's mutual fund regulations, a mutual fund is established as a trust to raise money through units and invest in securities, including money-market instruments. 2. A money-market mutual fund is set up with the objective of investing exclusively in equity shares. 3. A sponsor is a person who establishes a mutual fund, acting alone or with another body corporate. Which of the statements given above are correct?
11Consider the following statements: 1. Cash Management Bills were introduced in 2010 by the Government of India in consultation with the RBI. 2. Cash Management Bills are issued for maturities of more than 91 days. 3. Dated Government Securities generally pay coupon on a half-yearly basis. Which of the statements given above are correct?
12Consider the following statements: 1. The function of the securities market includes allowing companies to raise capital from the public through the primary market. 2. The securities market enables trading in the shares of public companies through the secondary market. 3. A stock exchange is constituted for assisting and carrying out buying, selling or dealing in securities. 4. SEBI started operations in 1992 through an order of the Government of India. Which of the statements given above are correct?
13Consider the following statements: 1. Under the SEBI-mutual fund framework, a mutual fund is a fund established in the form of a trust to raise money by selling units and investing in securities, including money-market instruments. 2. A sponsor, under SEBI's mutual fund regulations, is the person who establishes a mutual fund, acting alone or with another body corporate. 3. A money-market mutual fund is set up with the objective of investing exclusively in equity shares. 4. Under SEBI's definition, money-market instruments include Treasury Bills, Commercial Paper, Certificates of Deposit and call or notice money. Which of the statements given above are correct?
141. A Government Security is a tradeable instrument issued by the Central Government or the State Governments. 2. In India, State Governments issue Treasury Bills as well as dated securities. 3. State Government securities are called State Development Loans. 4. Government securities carry significant default risk and are therefore not treated as gilt-edged instruments. Which of the statements given above are correct?
15Consider the following statements: 1. A depository holds securities in electronic form and facilitates securities transactions. 2. A Depository Participant must be registered with SEBI and affiliated with NSDL or CDSL. 3. Investors can open a demat account directly with NSDL or CDSL without a registered Depository Participant. Which of the statements given above are correct?