CBSE Class 12 Business Studies HOTs Financial Market Set B

Ques 1: Name the market where companies issue new securities.

Ans: Primary Market.


Ques 2: How many stock exchanges are there in India?

Ans: There are 22 regional stock exchanges and 2 National level Stock Exchanges- NSEI and OTCEI.


Ques 3: Why secondary market is considered as market for second hand securities?

Ans:  Because in this market existing and second hand securities are sold between investors.


Ques 4: Which money market security is also known as Zero Coupon Bond?

Ans:  ‘Treasury Bill’ is also known as Zero Coupon Bond.


Ques 5: Explain the term : Price Rigging

Ans: Price Rigging refers to manipulating the prices of securities with the main objectives of inflating or depressing the market price of securities.


Ques 6: A wants to get his company listed in National Stock Exchange . His company’s paid up capital is Rs. 20,00,000. Can he get it listed? Kindly advise him.

Ans: No, he cannot get it listed in NSE because to get listed in NSE minimum paid up capital required is Rs. 3 crore.


Ques 7: Distinguish between Capital market and money Market on the basis of following- (i) Participants (ii) Duration (iii) instruments


Ans:  (i) Participants- The participants in capital market are financial institutions, banks, public and private companies, foreign investors and ordinary retail investors from public whereas in money market, the participants are financial institutions, banks , public and private companies but foreign investors and ordinary retail investors do not participate.

       (ii) Duration- The capital market deals in medium and long term securities. Whereas the money market deals with short term securities having maximum tenure of one year.

      (iii) Instruments- The common instruments of capital market are Equity shares,   Debebtures, Pref. Shares, Bonds whereas the common instrument of money market are Treasury Bills, commercial bills, Certificate of Deposits, commercial paper.


Ques 8: Nature of ‘Capital market” can be well explained with the help of its features . State any three such features of Capital Market. 

Ans: (i) Link between saver and investment opportunities.

(ii) Deals in long term investment.

(iii) Utilizes intermediaries.


Ques 9: Nature  of ‘Money Market’ can be well explained with the help of its features. State and three such features of money market.

 Ans:  (i) Market for short term funds,

(ii) Deals in monetary assets whose period of maturity is upto one year,

(iii) Market where low risk, unsecured and short term debt instruments are issued and actively traded everyday.


Ques 10: State any three objectives of NSE.

Ans: (i) Establishing a nationwide trading facility for all types of securities.

(ii) Ensuring equal access to investors all ovet the country  through an appropriate communication network.

(iii) providing a fair, efficient and transparent securities market using electronic trading system.


Ques 11: Explain any three functions of a Stock Exchange.

Ans: (i) A Stock Exchange is a reliable barometer to measure the economic condition of a country.

(ii) It helps to value the securities on the basis of demand and supply factors.

(iii) It provides ready market for sale and purchase of securities.


Ques 12: ‘SEBI is the watchdog of security market’. Comment.

Ans: SEBI was setup in 1988 to regulate the functions of the securities market and to protect the interest of investors but SEBI was found ineffective in regulating the activities of stock market. It was able to observe and watch only but failed to take corrective measure that is why it is called as watchdog.


Ques 13: ‘Stock market imparts liquidity to investment’. Comment.

Ans: The Stock market is a place where securities of companies are bought and sold. Generally the securities are long term and get matured only after a long period of time. These securities can be sold in stock market and can be easily converted into cash. The presence of market is an assurance to investors that their investment can be converted into cash  as and when required by them.


Ques 14: State any two methods of issuing securites in Primary Market.

Ans: The Primary market is also known as the new issues market. It deals with new securities being issued for the first time. The securities may be issued in primary market by following two methods:

(i)    Public issue through prospectus

(ii)    Offer for sale.


Ques 15: Explain the terms: (i) Bulls (ii) Bears (iii) Stag

Ans: (i) Bulls- A bull is a speculator who expects rise in price. He buys securities with a view to sell them in future at a higher price and making profit out of it.

(ii) Bears- A bear is a speculator who expects fall in the price. He sells securities which he does not possess.

(iii) Stag- A stag is a speculator who applies for new securities in expectation that prices will rise by the time allotment and he can sell them at premium.


Ques 16: What function does financial market perform?

Ans: The financial market performs the function of bringing together the deficit units ( corporate Sector) and surplus units (investors). It is through financial market that the lender meet the borrowers.



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