MODEL PAPER BB0022 Capital and Money Market

(4 Credits) Part A: 1 Marks Questions (Question Number 1 - 40)

Part B: 2 Marks Questions (Question Number 41 - 60) Part C: 4 Marks Questions (Question Number 61 - 80)

Total Marks: 320 Please Answer All Questions

Part A

1. ______ plays a vital role for implementation of business activity. a. Securities and Exchange Board of India (SEBI) b. Stock Exchange c. Securities Contracts Regulations d. Financial Securities.

2. From which point of view the utility of Stock Exchanges may be examined

that it protects the share holders with guarantee security of loans. a. Community and Company b. Investors and Company c. Community only d. Investors only

3. Whenever a person wants to Buy and Sell the assets he depends on

_____________. a. Personal transaction b. Brokers c. Placing the orders directly with the Stock Exchange d. Placing the orders directly with the Bombay Stock Exchange (BSE)

4. What are the reasons for the cause of Price Fluctuations? a. Bank rate and the financial position of the company. b. Trade cycles and Balance of payment positions. c. Unforeseen competition and Sympathetic fluctuations. d. All the above.

5. Preventing healthy speculations, desirable transactions and activities is one

of the major objectives of ______. a. National Stock Exchange (NSE) b. Securities and Exchange Board of India (SEBI) c. Securities Contract Regulation Act (SCRA) d. None of the above

6. Powers of Stock Exchanges are exercised by _________.

a. State government b. Central government c. State and Central government d. Local self government

7. What does OTC stand for in OTCEI and what are its characteristics?

a. On The Counter, Decentralized working with a national work. b. Of The Counter, Centralized working with international work. c. Over The Counter, Decentralized working with a national work. d. Often The Counter, Centralized working with international work.

8. Which of the following is an advantage of Listed Securities?

a. Speculative activities in the prices b. High collateral value c. Boosting market and Liquidity of securities d. Free negotiability of securities

9. What kind of request is required for listing of securities when a company

seeks for Documents? a. Share transfer form b. Particulars of capital structure c. Balance sheet for the last 15 years d. Non distribution of shares statement.

10. The ___________ organization is endorsed by National Stock Exchange

(NSE). a. Securities and Exchange Board of India (SEBI) b. Bombay Stock Exchange (BSE) c. The National Securities Depositary Limited (NSDL) d. Regional Stock Exchange (RSE)

11. If an individual wants to be a part of depositary through a depositary participant then who is the Depositary?

a. Financier b. Organization c. Client d. Consumer

12. Choose the correct definition for Depositary, among the following: a. Investor’s assets are under custody in the Manual form. b. Shareholders securities are held on the request of the investors in

Electronic form. c. Depositary enables the transfer of Electronic form to Physical share

certificate. d. Dematerialization process is followed that it will not affect the

settlement of Securities.

13. Identify the benefit of a Depositary system. a. Bad deliveries b. Transmitting transfer documents c. Problems are eliminated out of Scrip-Based system d. There is a scope for Risk of Loss.

14. A Depositary System is an official agent of ________. a. National Stock Exchange (NSE) b. Securities and Exchange Board of India (SEBI) c. The National Securities Depositary Limited (NSDL) d. Depositary Participants (DPs)

15. The process of converting Electronic form into Physical share certificates is _________.

a. Dematerialization b. Materialization c. Re-materialization d. None of the above

16. What are the quarterly reports of the Mutual Funds to the trustees is submitted by Asset Management Company (AMC)?

a. Schemes b. Close end schemes c. Open end schemes d. All of the above

17. Grihalaxmi Unit Plan falls under which of the following schemes/plans?

a. Growth scheme b. Open end scheme c. Scheme for trusts d. Tax saving scheme

18. When an investor reaches at the age of 58, under which plan he can opt for monthly income?

a. Rajalaksmi Unit Plan b. Retirement Benefit Unit Plan c. United Linked Insurance Policy (ULIP) plan d. Tax Saving Plan

19. Investment in cement is an open end scheme that falls into which Mutual Fund and is promoted by whom?

a. Magnum Index Fund, Oriental Bank of Commerce b. Magnum Balanced Fund, State Bank of India c. Magnum Equity Fund, Canara Bank d. Magnum Multipliers Plan 1993, Central Bank of India

20. Residual risks are taken care by ________.

a. Investors b. Debt instruments c. Owners of the company (Employers) d. All the above

21. Evaluation that is carried by Fundamental Analysis is for________. a. Earnings per share (EPs) b. Inventory norms c. Operational efficiency d. Planning and Control system

22. The continuous change in the Financial Markets of Securities is exposed to ________.

a. Commodities b. Foreign exchange risk c. Price risk d. Low degree of volatility.

23. A Forward Contract is _________. a. A contract that can be reversed b. A collateral contract that settles the securities on the due date by

delivery c. A contract to buy or sell the securities on a specific date for a specific

time d. A contract that is not negotiated by the parties.

24. What is the purpose of Hedging through a Forward Contract?

a. Avoiding the adverse price risk b. Affecting the change in price c. Rise in price of an asset d. Risk of deterioration in quality.

25. Who is a Bull Speculator?

a. Buying the assets at Higher Price and selling it for Current Price. b. Buying the assets at Lower Price and sells it at Higher Price. c. Buying the assets at Current Price and selling it for Lower Price. d. Buying the assets at Higher Price and selling it for Lower Price.

26. What is the attitude for Put Option Seller?

a. Bullish b. Bearish c. Pessimistic d. Unenthusiastic

27. Who is the writer of a Call Option? a. The person who buys the Right to the seller. b. The person who gets the Right to sell the asset at the exercise price

within expiry date. c. The person who sells the Right to the buyer. d. The person has an obligation to buy the asset at the exercise price if

the buyer chooses to exercise the Option.

28. Under which section of the Income Tax Act 1961, the tax liabilities of an investor are reduced?

a. 10(33) b. 88 c. 48 d. 112

29. In which Section, Indian Act 1961 the investor has to pay 10% tax on Long

term Capital Gain? a. 83 (a) b. 112 c. 44 d. 88

30. Bombay Stock Exchange (BSE) with the base year 1983 – 84 =100 is in

which year ___________. a. 1999-2000 b. 1988-89 c. 1989-90 d. 1985-86

31. Swaps and Options are termed as _______ .

a. Derivatives b. Commodities c. Assets d. Exchange Rate

32. Wholesale Debt Market (WDM) is concerned with ________.

a. Certificates of deposits b. Equity c. Corporate debt instruments

d. Commercial papers

33. __________ is one of the quick obligations in order to notify the listed securities that are not provided guidelines by Securities Exchange Board of India (SEBI)?

a. Surplus payment will be declared at board meeting b. Alterations in the company capital c. A rapid transfer d. Special charges are provided with the consolidation of securities

34. Mutual Funds are associated under ___________.

a. Indian trust acts (UTI) b. Wholesale Debt Market (WDM) c. The National Securities Depositary Limited (NSDL) d. National Stock Exchange (NSE)

35. Investors control few risks but few risks cannot be controlled by Investors.

State what are the factors caused by risks? a. Amount of investments b. Taking right decision where to invest c. Right timing of investments d. Specific period of investment

36. __________ is one of the objectives of financial institution is to rate debt

obligations on a voluntary basis. a. The Investment Information and Credit Rating Agency of India

Limited(ICRA) b. Credit Rating and Information Services of India Limited (CRISIL) c. Duff Phelps Credit Rating India Private Limited (DPCR) d. Credit Analysis and Research Limited (CARE).

37. The agent who receives the order for Securities must pass on the order to the_____________.

a. Clearing House b. Floor Brokers c. Future Commission Merchants d. All the above.

38. The cash that is settled immediately is known as __________. a. Futures Market b. Cash Market c. Stock future price d. Forward contract.

39. In which contract both the buyer and seller must perform at the settlement

date? a. Future Contract b. Cash Market c. Forward contract d. Stock future price.9a, 50

40. The objective of regulation is _______ and the delay of buying and selling

assets are banned for carrying the business. a. To filter the excesses and make sure of Stable Market. b. To filter the excesses and make sure in times of Instability of a

Market. c. To filter the excesses and make sure of Stable Market. d. To filter the excesses and make sure in times of Instability of a

Market.

Part B 41. Why Stock Exchange is a Structured Market?

a. Stock Exchange is a composed supplementary for organization. b. Stock Exchange that deals with security contracts includes Shares and

Debentures of a community that is already issued. c. Maintaining the business of Buying and Selling financial securities of a

Structured Market. d. Stock Exchange is the conformation securities providing a market

place for Purchasing and Selling of Business debts.

42. Which of the following economic function of stock exchange compromises when stuck between Buying and Selling securities and why?

a. Evaluation of securities unweaves the current value of assets like Buying and Purchasing is Determined.

b. Evaluation of securities traded on the exchange is easily Marketable. c. The Stock Exchange helps in channeling the public savings from less

to more profitable sectors of Economy. d. A large number of different assets tend to equalize for Demand and

Supply.

43. Stock exchange illustrates as ________ because of _______. a. “Mart of the world” as the whole world that represents assets of the

ownership property of companies is marketed at Stock Exchange. b. “Mart of the world” as the country represents the assets of the public

property is marketed at Stock Exchange. c. “Mart of the world” as the state represents the assets of the public

property is marketed at Stock Exchange. d. None of the above.

44. A reasonable return on the investment is called ______ and ______ speculation may have fluctuations.

a. Capital appreciation, High degree of risk b. Investment, High degree of risk

c. Investment, Medium degree of risk d. Source of profit, Low degree of risk

45. Who is called as a “Long Buyer?”

a. Buying the shares with Higher price and selling it for Lower price. b. Buying the shares at Current price and selling it for Higher price. c. Buying the shares at Higher price and selling it for Current price. d. None of the above.

46. What is the difference between Call Option and Put Option?

a. Call option is to sell and Put Option is to purchase the securities. b. Call option is to buy and Put Option is to sell the securities. c. Call option is to purchase and Put Option is to sell the securities. d. Call option is to purchase and Put Option is to buy and sell the

securities.

47. Bombay Stock Exchange (BSE) is established in ________ and the membership can be attained through__________.

a. 1985, Inheritance. b. 1875, Nomination. c. 1994, Selection. d. 1874, Proposal.

48. London Stock Exchange is also called as _______ and can deal the

securities in its own name that is similar to ____________. a. Jobber, Tarawaniwala b. Broker, Mandiwala c. Broker, Tarawaniwala d. Jobber, Tejiwala

49. What is RSE and with what it deals? a. Regional Stock Exchange that deals with only listed securities of more

than one Stock Exchange. b. Rational Stock Exchange that deals with only shared listed securities

of only one Stock Exchange. c. Report Stock Exchange that deals with both listed securities and

shared listed securities of only one Stock Exchange. d. Rating Stock Exchange that deals with only listed securities of more

than two Stock Exchanges.

50. What conditions are satisfied if a company wants to execute a Listing Agreement?

a. Scrutinizing complete paid shares b. Claimed dividends will be fortified before the time barred c. Company must offer for private subscription d. Use of uncommon share transfer form.

51. Why should the Board of Trustees have at least two outside trustees?

a. The people who are connected with the sponsored bank should vest in the Board of Trustees.

b. The overall affairs of the management and business funds should not vest in the Board of Trustees.

c. Persons with ability and integrity with proven capacity deals with the problems relating to the Investments.

d. None of the above.

52. What is the rule before announcement of any scheme that is approved by Reserve Bank of India (RBI)?

a. The scheme approved earlier should not be identical to the new scheme.

b. The mutual funds have to make investments in accordance with other Unit Trust.

c. Banks should not obtain the RBIs approval for any scheme.

d. Investing the assets in the Money Market instruments is one of the objections to the Mutual Funds.

53. _______ and _______ are the famous index followed by the investors on the National Stock Exchange.

a. BSE 200 and BSE dollex b. BSE sensitive index, BSE sensex c. S&P CNX NIFTY, BSE sensitive index d. S&P CNX NIFTY, BSE sensex

54. Which of the following Rating Grades is/are true and what does ‘Pf’ signify?

a. BBB- Highest safety, Debentures b. AA- High safety, Preference Shares c. AAA- Inadequate safety, Fixed Deposits d. BC and D- Adequate safety, Short Term investments

55. What are the risks involved in evaluating the instruments in Credit Rating

and Information Services of India Ltd (CRISIL)? a. Business analysis b. Fundamental analysis c. Financial analysis d. All the above

56. Which of the following is the difference between Future Contract and

Forward Contract? a. In Future Contract the investor must deposit margin money where as

in case of Forward Contract it is not required. b. Future contract has secondary market for Forward Contract there is

no secondary contract. c. No counter-party risk in Future Contract there is a counter-party risk

in Forward Contract. d. All the above

57. When does the Arbitrage Opportunity exist? a. If the Future Price is not more than the full Carry Cost. b. If the Actual Future Price is not equal to the Theoretical Future Prices. c. If the Future Price is poor to the Cash Price. d. If the Future Price is equal to the Full Carry Price.

58. How Stock Market indices are useful for Stock Index Futures?

a. Stock Market Indices help in Risk Management. b. Stock Market Indices assess the performance of different funds that

are not standard. c. Stock Market Indices provide only limited information. d. None of the above.

59. A Call Option is said to be a positive cash flow if the Money is exercised then what is the condition for At The Money (ATM):

a. Stock price < Exercise price b. Stock price > Exercise price c. Stock price = Exercise price d. Stock price # Exercise price

60. Which of the following is True/False?

1. Index captures the overall Market behavior. 2. Bombay Stock Exchange (BSE) represents all major industries quoted

on the exchange. 3. BSE has 100 scrip’s which are traded actively. 4. To include new economy scrip’s the composition of Sensex was

changed.

Part C

61. State which of the following are true: 1. Capital market is quite identical to Money market because of various

sources of Long and Short term finances. 2. Capital and Money market are different from each other as they

provide both Long and Short term investments. 3. Capital market converts the funds into savings through profit

companies and Money market is to deal and operate with the Short term funds.

4. Capital market is dependent on Money market so as to exert a pull of different banks for Short term savings. a. Statements 1 and 3 are true b. Only statement 2 is false c. Statements 2 and 4 are false d. Only statement 3 is true

62. 1. The restriction of transfer of shares in trading refuses the company Right to Reserve.

2. Under the Indian company act, 1956 the Public and Private limited companies have unlimited shares that has to be paid up.

3. Ample monetary funds through security will have unequal distribution of shares

4. Private company do not have right to enter into the security market because of Transfer of shares are restricted.

State True or False: a. Statements 1 and 4 are true b. Only statement 2 is true c. Statement 2 and 3 are true d. d. Statements 1, 3 and 4 are false.

63. What is the particular act that is required in the Security market? 1. Limited number with Large number of Small investments. 2. Limited number with Small number of Small investors. 3. Unlimited number with Small number of Large investors. 4. Unlimited number with Large number of Large investors.

State True or False: a. 1- True, 2- False, 3- False, 4- False b. 1- True, 2-True, 3- False, 4- True c. 1- False , 2- False, 3- True, 4-True d. 1- False, 2- True, 3- False, 4- True

64. Which of the following sector helps the organization to admit for

Economical Funds? 1. Transportation, Roads, and Airports 2. Refining, Power, and Ports 3. Fuel, Telecommunications, and Roads 4. All of the above.

a. Only statement 4 is true b. Statements 2 and 3 are false c. Statements 1 and 3 are false d. Statements 1 and 2 are false

65. Which of the following are True?

1. Ownership security is elevated by Joint Stock companies. 2. A preference share is a dividend of Corporate Security. 3. When an association is sored then the preference shares have a Right

to return of assets. 4. Preference shares have a surplus payment throughout the existence

of company. a. 1- True, 2- False, 3- False, 4- False b. 1- False, 2- True, 3- False, 4- True c. 1- True, 2- False, 3- False, 4- True d. 1- False, 2- False, 3- True, 4- True

66. Which of the following are True about Underwriting Agreement? 1. The portion of the shares that the public is not taking for what it

states in the Agreement. 2. Underwriters are not supposed to suggest an organization about

Capital Circumstances. 3. For smooth running of capital market under different conditions

underwriter helps to Trick the Solution. 4. Underwriter does not have a responsibility to take a special interest

of share out Securities. a. Only statement 2 is true b. Statements 1 and 3 are true c. Statements 3 and 4 are true d. Statements 1, 2 and 3 are false.

67. Which of the following method is used for Raising Capital?

1. Private placing is in the form of a usual loan and is not a purchase of the share that is sponsored by the Finance company.

2. Book building assists the private placement if it fails to provide Quantities and Prices for which they are equipped to subscribe.

3. The proposal for the subscription of shares from the public is illegal and can raise the capital without providing Prospectus.

4. Shares that are offered to the new shareholders with right to reserve to the public in favor of Nominee. a. Only statement 1 is true b. Only statement 2 is true c. Statements 1 and 2 are false d. Statements 3 and 4 are true

68. What is the Nature of Activity of a business to be financed that is required for the mobilization of Production and Marketing?

1. Long term for Public Deposits. 2. Short term for Installment Credit. 3. Medium term for Issues of Debentures. 4. Medium term for Trade Credit.

a. 1- True, 2- False, 3- False, 4- False b. 1- False, 2- False, 3- True, 4- False c. 1- False , 2- True, 3- False, 4- True d. 1- False, 2- False, 3- True, 4- True

69. An association formed by the group of underwriters bearing the whole risk

is adapted in, which Agreement: 1. Outright purchase. 2. Consortium method. 3. Standing behind the issue. 4. None of the above.

a. 1- True, 2- False, 3- True, 4- False b. 1- True, 2- True, 3- True, 4- True c. 1- False , 2- False, 3- True, 4- True d. 1- False, 2- True, 3- False, 4- False

70. Which of the following are true about Equity shares?

1. Few preference shares are Equity shares. 2. Equity shares are not permanent. 3. The legal responsibility of stockholder of Equity shares is Inadequate. 4. Increase in Price and Rise of stockholders Equity shares.

a. Only statement 1 is true b. Statements 2 and 3 are true c. Statements 1and 4 are true d. Only statement 4 is false.

71. 1. Buyback is the process of buying the shares by a company and is about increase in Equity and Decrease in earnings per share (EPS).

2. Increase in Share prices and Rejection in liquidity makes the process difficult to buy back.

3. The alignment of Capital and Financial position may alter in order to provide Flexibility.

4. Buyback shares can be replaced on a Standard source. State true or false. a. Only statement 1 is false b. Only statement 2 is true c. Statements 2 and 3 are true d. Statements 1 and 4 are false

72. Identify true or false from the following statements:

1. The best offer price over Current Market Price of shareholders is fixed tender offers.

2. Maximum number of shares can be bought, of which a single price must be selected to tender the holders shares is Dutch auction tender offers.

3. The least and the best offer price over Current Market Price of shareholders is variable tender offers.

4. The best offer price over Current Market Price of shareholders is Dutch auction tender offers. a. 1- True, 2- False, 3- False, 4- False b. 1- True, 2- True, 3- False, 4- False c. 1- False , 2- True, 3- False, 4- True d. 1- False, 2- True, 3- True, 4- True

73. Identify which of the following statements are true about Debentures:

1. The resolute property of the charge may be definite or fluctuating in Mortgage debenture.

2. Convertible debenture does not have option to the holders to convert them into Preference shares.

3. Bearer debentures are those who registered their names in the Debenture holders.

4. Irredeemable debenture has no specific time for the compensation of the debenture. a. 1- True, 2- False, 3- True, 4- False b. 1- True, 2- True, 3- False, 4- True c. 1- False , 2- False, 3- True, 4- True d. 1- True, 2- False, 3- False, 4- False

74. Which of the following buyback shares are Demoralized?

1. Favorable purchase when shares are at high level. 2. Unfavorable incidents when shares are at low level. 3. Devalue of earnings. 4. All of the above.

a. Only statement 4 is true b. Only statement 2 is true c. Statements 2 and 3 are true d. Statements 3 and 4 are false

75. Identify true or false for the following statements:

1. Immediate transactions are possible with the negotiated deals of Securities and Exchange Board of India (SEBI) regulations.

2. Daily basis stock exchange under the buyback scheme made available to the public.

3. Buyback scheme allows open market operations modes and purchase through stock exchange.

4. Specified time of two years is maximum for the extensive disclosures from the date of passing resolution. a. 1- True, 2- False, 3- True, 4- False b. 1- True, 2- True, 3- False, 4- False c. 1- False , 2- True, 3- True, 4- False d. 1- False, 2- True, 3- False, 4- True

76. Which of the following are true statements: 1. Bombay online trading system (BOLT) is online computerized trading

which is introduced first. 2. Online buying and selling of assets provides a Quota Facility. 3. BOLT provides on spot online trading for other Stock Exchanges. 4. The lowest buying price and the highest selling price offer the best

for Investors. a. Only statement 2 is false b. Statements 1, 2, and 3 are true c. Statements 1 and 2 are false d. Statements 1, 2, 3, and 4 are true

77. Which of the following is false about Reserve Bank of India (RBI)?

a. Investing funds inclusively in money market instruments regulated by RBI.

b. Investing funds in money market instruments regulated by RBI is also partially regulated by Securities and Exchange Board of India (SEBI).

c. The sponsor bank should contribute certain amount specified by RBI. d. All the above.

78. Which among the following is True/False with respect to Asset

Management Company (AMC)? 1. AMC is allowed to act as the Trustee of a unit trust. 2. Securities and Exchange Board of India (SEBI) may extract the

sanction that is granted by any AMC. 3. There is no necessity that the directors of AMC should have a

Professional Experience in relevant field. 4. The director of AMC should not hold the position of a Trustee.

a. 1- False, 2- False, 3- True, 4- False b. 1- True , 2- False, 3- False, 4- True c. 1- True , 2- True, 3- True, 4- False d. 1- False, 2- True, 3- False, 4- False

79. Net Asset Value (NAV) is calculated as prescribed by the Securities and Exchange Board of India (SEBI). Which of the following relation hold true?

a. NAV = total number of units outstanding + income + total capital unit/appreciation-depreciation of investments

b. NAV = total capital units + income + appreciation – depreciation of investments/total number of units outstanding

c. NAV = total capital units + appreciation – depreciation of investments + total number of units outstanding/income

d. NAV = income + appreciation – depreciation of investments + total number of units outstanding/total capital units

80. State True or False with respect to Unit Trust of India (UTI):

1. Balanced and open end schemes 2. Growth scheme and liquid fund 3. Income scheme and money market fund 4. Closed end schemes and interval schemes

a. 1- True, 2- False, 3- False, 4- False b. 1- True, 2- False, 3- True, 4- False c. 1- False , 2- True, 3- True, 4- True d. 1- True, 2- True, 3- True, 4- True