CBSE Class 12 Business Studies Financial Markets Worksheet Set C

Important Questions for NCERT Class 12 Business Studies Financial Markets

Question. It is necessary for an investor to obtain Certificate of Deposits for ™ ________ lakh.
(a) 5
(b) 10
(c) 25
(d) 50

Answer  :  C

Question. ________ is a part of capital market.
(a) Call Money
(b) Primary Market
(c) Secondary Market
(d) Primary and Secondary Market

Answer  :  D

Question. Primary market is associated with ________ issues.
(a) Old
(b) New
(c) Old and New
(d) Very Old

Answer  :  B

Question. Secondary market deals with the ________ of existing securities.
(a) Purchase
(b) Sale
(c) Purchase-sale
(d) Stock

Answer  :  C

Question. Which is the major part of financial system?
(a) Financial market
(b) Financial institutions
(c) Financial securities
(d) All of above

Answer  :  D

Question. Which of the following is included in the financial assets?
(a) Shares
(b) Debentures
(c) Treasury bill
(d) All the above

Answer  :  D

Question. Which of the following is the supply side of finance?
(a) Financial Institutions
(b) Insurance Companies
(c) Financial Institutions and Insurance Companies
(d) Industry

Answer  :  C

Question. Which of the following performs the functions of giving imputes to saving and transfer them to more productive uses?
(a) Wholesale Market
(b) Retail Market
(c) Financial Market
(d) Financial Institutions

Answer  :  C

Question. Sensex is dependent on ________ companies.
(a) 30
(b) 50
(c) 100
(d) 500

Answer  :  A

Question. Liquidity states of certificate of deposit which is more negotiable is considered as-
a. Certified liquidity
b. team liquidity
c. More liquid
d. lees liquid
Answer  : C

Question. Maturity period to call money is-
a. 1 to 15 days
b. 15 to 90 days
c. 15 to 1 years
d. 1 to 30 days

Answer  : A

Question. An money market instruments issued on behalf of Central Government.
a. Call Money
b. Treasury Bill
c. Commercial Paper
d. Commercial Bill 

Answer  : B

Question. Which one is the Protective function of SEBI?
a) Training of intermediaries of Security market
b) Registration of Broker and Sub- Broker
c) Promotion of fair trade practices.
d) Conducting research and publishing information useful to all market participants.

Answer : C

True or False

1. SEBI was set up with the main purpose of increasing business is stock markets. False
2. Under offer for sale, companies offer shares directly to general public.  False
3. Money market is a market for short term or market for working capital.  True
4. Call money is also called Inter bank money.  True
5. Capital market is a branch of money market.  False
6. Stock Exchange helps in dealing of second hand securities. True
7. Debentures can not be traded in stock exchange. False
8. Stock exchange helps in determining the prices of securities. True
9. Stock Exchange helps in reinvestments of savings into productive purposes. True
10. Registration of cpllecting investing schemes and Mutual funds is a Regulatory function of SEBI. True
11. Controlling unfair trade practices is a Regulatory function of SEBI. False
12. A Bullish phase refers to a period of optimism  True
13. A bearish phase refers to a period of optimism  False
14. Sensex is the bench mark index of the NSE. False
15. At present only two depositories are registered with SEBI . True

Question. State any one function of Stock Exchange.
Answer : Providing liquidity and marketability to existing securities.

Question. What is the full name of SEBI?
Answer : Securities and Exchange Board of India

Question.  What is meant by Financial Market?
Answer : It refers to the market that creates and exchanges financial assets.

Question. State any four functions of Stock Exchange.
Answer : The main function performed Stock Exchange are as follows:
(i) Providing Liquidity and Marketability to Existing Securities: Stock Exchange is a marker place where previous issued securities are traded. Various types of securities are traded here on regular basis. Whenever required, investor can invest his money through this market into securities and can recover this investment into cash. Availability of ready market for and purchase of securities increase their marketability and enhance the liquidity in Investment of money.
(ii) Pricing of Securities: A stock exchange provides platform to deal in securities. The forces of demand and supply work freely in the stock exchange. In this way, prices of securities are determined.
(iii) Safety of Transactions Stock Exchanges are organized markets. They fully protect the interest of investors. Each stock exchange has its own laws and bye-laws. Each member of stock exchange has to follow them and any member found violating them, his membership is cancelled.
(iv)Contributes to Economic Growth: Stock Exchange provides liquidity to securities. This gives the investor a double benefit-first, the benefit of the change in the market of securities can be taken advantage of and secondly, in case of need for money they be sold at the existing market price at any time. These advantages provided by the stock market encourage the people to invest their money in securities. In this way, people’s money gets invested in industries and economic development becomes possible.

Question. What is meant by Financial Assets?
Answer : it refers to the financial instruments or securities shares, debentures, commercial papers, etc.

Question. Give the meaning of 'Money Market'.
Answer : It refers to that market where transactions in short-term securities are made.

Question. What is meant by 'Primary Market?
Answer : It refers to the market in which securities are sold for the first time for collecting long term capital.

Question. Name the Index of National Stock Exchange.
Answer : It is known as NIFTY.

Important Questions for NCERT Class 12 Business Studies Financial Markets

Question. How many Regional offices SEBI has
a) 3
b) 13
c) 30
d) 4

Answer  : D

Question. Conversion of physical form of share certificate into an electronic entry is called
(a) Exchange Mechanism
(b) Conversion
(c) Dematerialisation
(d) Rematerialisation

Answer  :  C

Question. To buy securities, i.e., share or debentures, it is compulsory to open
(a) Current Account
(b) Demat Account
(c) Fixed Deposit Account
(d) Recurring Account

Answer  :  B

Question. Money market is a market for dealing in
a)Long term fund
b)Medium term fund
c) short term fund
d) Both a and b

Answer  :  C

Question. Instruments deals in capital market are
a) call money
b) Commercial Bill
c) Zero Coupon Bard
d) Equity Shares

Answer  :  D

Question. Treasury bill is issued by
(a) development financial institution
(b) commercial bank
( c ) selected individuals
( d ) reserve bank of India 

Answer  :  D

Question. Call money is used to
( a ) maintain a minimum cash balance known as a cash reserve ratio
( b ) To meet floatation cost
( c ) To meet working capital needs
( d ) To meet fixed capital needs 

Answer  :  A

Question. Which instrument does not relate to capital market
a) Commercial Paper
b) Shares
c) Debentures
d) Bonds

Answer : A

Question. Which money market instrument is used for interbank transaction?
a. Treasury Bill
b. Call money
c. Certificate of Deposit
d. Commercial Bill

Answer : B

Question. Which money market instrument is used to maintain CRR by the banks?
a. Treasury Bill
b. Call money
c. Certificate of Deposit
d. Commercial Bill

Answer : B

Question. Primary and secondary market
a. Compete with each other
b. Complement with each other
c. Function independently
d. Control each other.

Answer : B

Question. Which of the following falls in the Category of Zero Coupon Bond?
(a) Treasury Bill
(b) Commercial Paper
(c) Certificate of Deposit
(d) Commercial Bill

Answer  :  A

Question. Which of the following is the method of collecting capital?
(a) Public Issue
(b) Offer for Sale
(c) Private Placement
(d) All the above

Answer  :  D

Question. Only buying of securities takes place in
( a ) Secondary market
( b ) Primary market
( c ) money market
( d ) capital market

Answer  :  A

Question. Identify the function of stock exchange
a) Trading and settlement procedure
b) Dematerialization
c) Pricing of securities
d) Depository participants

Answer : C

Question. Which money market instrument is also known as Zero Coupon Bonds ?
a) Treasury Bill
b) Call money
c) Certificate of Deposit
d) Commercial Bill

Answer : A

Question. Which instrument of money market is issued by RBI on behalf of the Central Government?
a. Treasury Bill
b. Call money
c. Certificate of Deposit
d. Commercial Bill

Answer : A

FILL IN THE BLANKS

1. Capital market is a link between Savers and investment opportunities.
2. In India, there are Two number of depositories.
3. NSDL refers to National securities Depository Limited.
4. CDSL refers to central Depositories Securities Ltd.
5. The agent between Investor and Depositories is called Depository Participant..
6. The day when investor has to deliver shares sold or pay cash for shares bought is called Pay in Day.
7. The day when stock exchange delivers the share or makes payment to the other broker is called Pay out day.
8. Bombay Stock Exchange Index is called Sensex.
9. National Stock Exchange Index is called Nifty.
10. To promote and develop activities in stock exchange, SEBI performs Developmental function.
11. Treasury bill is also known as Zero coupon bond.
12. Maturity period of commercial papers is 15 days to 1 year.
13. Two major alternative mechanism through which allocation of funds can be done are bank and financial markets.
14. Financial market is a market for creation and exchange of financial assets.
15. Rate paid on call money is known as call rate.

Question. Define Capital Market. State the two parts of capital market.
Answer : Capital Market: It refers to that market where transactions in long-term securities are (i) Primary Market: It refers to that market in which securities are sold for the first time for collecting long-term capital.

Question. State the functions of Financial Market.
Answer : Functions of Financial Market
Following are its main functions
(i) Mobilisation of savings and their Channelisation into more Productive Uses: Financial market gives impetus to the savings of the people. This market takes the uselessly finance in the form of cash to places where it is really needed. Many financial are made available for transferring finance from one side the other side. The investor can invest in any of these instruments according to their wish.
(ii)Facilitates Price Discovery: The price of any good or service is determined by the of demand and supply. Like goods and services, the investors also try to discover the price of securities. The financial market facilitates price discovery for financial interaction of forces of demand and supply.
(iii) Provides Liquidity to Financial Assets: This is a market where the buyers and the of all the securities are available all the times. This is the reason that it provides liquidity to securities. It means that the investors can invest their money, whenever they securities through the medium of financial market. They can also convert their into money whenever they so desire.
(iv) Reduces the cost of Transactions: Various types of information is needed while buying and selling securities. Much time and money is spent in obtaining it. The financial market available every type of information without spending any money. In this way, the final market reduces the cost of transactions.

Question. .What is meant by Capital Market'?
Answer : It refers to the market where transactions in long-term securities are made.

Question. Explain the various money market instruments.
Answer : Following is the brief description of money market instruments
(i)Treasury Bill: Treasury Bill means that short term instrument which the Central issues to the financial institutions or the general public order meet its short term financial needs. Usually their maturity period is 14 days, 91 days, 182 days and 364 days Treasury bills are of highly liquid nature because the RBI is ever-ready to buy them on discount. They are issued at less than the face value while the payment is made at the face value.
(ii)Commercial Paper (CP): Commercial Papers are those unsecured Promissory Notes which are issued by well-reputed companies. The minimum face value of a commercial paper is five lakh rupees. It is used to meet the demand of a short-term seasonal need and the requirement of working capital. They are issued for a period of 15 days to 12 months.
(iii) Call Money or Call Loans: Call loan means that loan document for which the payment can be made at a short notice either by the borrower or the lender. Under this, the maturity period of the loan is between I and 15 days. The lowest amount of this instrument is rupees 10 crore. They are generally used by the banks for the following reasons:
(a) To control the Statutory Liquidity Ratio (SLR).
(b) To invest cash, more than what is needed, for short term.
(iv) Certificate of Deposit (CD): Certificate of deposit is a negotiable instrument which can be transferred after a certain period by an endorsement. IL is issued by the Scheduled Commercial Banks and the Indian Financial Institutions like IDBI, IFCI, ICICI, SIDBI and EXIM Bank. They are issued for a period ranging between 91 days and one year. They are issued on discount. An investor can transfer the certificates of deposits after a lapse of 45 days by an endorsement to any person.
(v) Commercial Bill: It is a negotiable instrument which can be easily transferred. It is used to finance the credit sales. The seller (drawer) draws the bill and the buyer (drawee) accepts it. The buyer honors the bill on the due date. If the seller needs money before the due date he can get the bill discounted from the bank. It is a short-term instrument, generally, issued for a period of 90 days.

Question. Mr. Sanjay got a chance to buy shares in the ratio of 2:1 from Ranbaxy Ltd.
What is this type of issue called?
Answer: Right issue

Question. A steel company is diversifying and starting a textile manufacturing plant.
State with reason the effect of diversification on the fixed capital requirements of the company.
Answer: With diversification, the fixed capital requirements will increase as the investment in fixed capital will increase.

Question. What do you mean by Financial market. 
Answer: A market, which makes link between finance providers and finance users, is called Financial Market.

Question. Write any Three Functions of Financial Market 
Answer:
1. Mobilizing savings:-In financial market households/families may come as financer and can place their savings from unproductive place to productive place as investment for getting interest /dividends.
2. Price discovery: - Purchaser of security wants to purchase security at cheapest price and seller of security wants to sell his security at highest price both may achieve their aim in (secondary) financial market. In stock market.
Security holder can discover/know/get, highest or best price of his security.
3. Liquidity of Securities: - Liquidity is, selling security in cash. Security holder can sell his security in stock market / exchange for getting cash when he needs so.

Question. Write the Instrument or security of Financial Market. 
Answer: (a) Treasury Bill :-
These are issued by RBI at discount and repaid at face value, difference is interest. These have maturity period of 14 to 364 days. The face value of these is multiple of Rs.25000.General Public and Banks purchase these bills.
(b) Commercial Paper(CP):-
These are unsecured promissory notes issued by well-reputed companies.
These have maturity period of 15 to one year. The face value of these is multiple of Rs.5,00,000. These can also issue at discount and repaid at face value.
(c) Call Money:-
When bank take loan from other bank, for 1 day to 15 days, due to shortage of funds and maintaining CRR decided by RBI. Interest rate/call rate of these loans varies frequently.
(d) Certificate of Deposit(CD):-
Commercial banks and financial institutions issue CD against the deposit kept by them. These are transferable and bearer. These have maturity period of 91 days to one year. These have face value of Rs.5 lakhs, but one has to purchase minimum Rs.25 lakhs’CD.

Question. Kanika was a regional sales manager in ‘Biba Fashions Ltd’ for eight years.
On the retirement of the marketing manager Kanika applied for the same post as she was extremely ambitious and had dedicated all her energies to obtain the post of marketing manager. However, the top management of the company decided to fill this post by selecting a better person from outside the company.because of this Kanika was heart broken and her performance declined. When the new marketing manager joined, one of her major problems was how to motivate and inspire Kanika to her former level of performance.
Suggest any three non-financial incentives that the new marketing manger may use to motivate Kanika.
Answer: Non financial incentive are:-
a)job enrichment
b) employee recognition
c)employee empowernment
d)employee participation

Question. “Efficient functioning of stock exchange creates a conducive climate for active and growing primary market for new issues as well as for an active and healthy secondary market.’ In the light of this statement state any three functions of a stock exchange.
Answer: Functions:-
a) provides liquidity and marketability to existing securities
b) ensures safety of transactions
c) contributes to economic growth

Question. State any four factors which affects the requirements of working capital requirements of a company.
Answer: a)nature of business
b) scale of operations
c) business cycle
d) production cycle

Question. Give the meaning of the following money market instruments.
i. Treasury bill
ii. Call money
Answer: i. Treasury Bill (T-bills): It is basically an instrument of short-term borrowing by the Government of India maturing in less than one year. They are also known as Zero Coupon Bonds.
ii. Call Money: It is a short-term finance repayable on demand, with a maturity period of one day to fifteen days, used for inter-bank transactions. It is a method by which banks borrow from each other to be able to maintain the cash reserve.

Question. Write difference between NSEI and OTCEI.
Answer: