Financial Markets

Topics in this chapter

• Financial Market Basics
• Money Market Instruments
• Primary Market Issue Methods
• Secondary Market Trading
• Stock Exchange Operations
• Depositories and Demat Services
• SEBI and Investor Protection

Cheat sheet

Practice questions

1. Question 1Q-0E18D1

   Which of the following is a money market instrument issued by the Government of India to meet its short-term financial requirements?

   1. A.Equity shares
   2. B.Treasury bills
   3. C.Preference shares
   4. D.Debentures with a 15-year maturity
   See the answer and solution
2. Question 2Q-590D63

   A company offers its shares to the public for the first time to raise fresh capital. In which market does this transaction take place?

   1. A.Secondary market
   2. B.Money market
   3. C.Primary market
   4. D.Foreign exchange market
   See the answer and solution
3. Question 3Q-30F21D

   Which action best represents the regulatory function of the Securities and Exchange Board of India (SEBI)?

   1. A.Providing long-term loans directly to companies
   2. B.Fixing the market price of every listed security
   3. C.Prohibiting insider trading and regulating intermediaries in the securities market
   4. D.Issuing currency notes for circulation
   See the answer and solution
4. Question 4Q-E5B12E

   Differentiate between the primary market and the secondary market on the basis of the nature of transactions and the flow of funds.

   See the answer and solution
5. Question 5Q-DA1E83

   A large and creditworthy company wants to raise short-term funds through an unsecured promissory note issued directly to investors. Which money market instrument should it use?

   1. A.Certificate of deposit
   2. B.Commercial paper
   3. C.Call money
   4. D.Government security
   See the answer and solution