Class 12 Business Studies Chapter 10 MCQ and Important Questions of Financial Markets for the academic session 2022-2023. Class 12 Business Studies MCQ are important study material for CBSE as well as other State board students during the exam preparation. Class 12 Business Studies Chapter 10 Solutions.
Class 12 Business Studies Chapter 10 MCQ
Q1
The settlement cycle in stock exchange is
[A]. T + 1
[B]. T + 2
[C]. T + 3
[D]. T + 4
Answer: Option B
Explanation:According to SEBI, settlement takes place after two days after the transaction.
Note – As per recent amendments, settlement takes place as per option [a].
Q2
SEBI was established in
[A]. 1994
[B]. 1984
[C]. 1988
[D]. 2013
Q3
……… is the market where “second hand” securities are bought and sold for investment and speculation.
[A]. Primary market
[B]. Secondary market
[C]. Money
[D]. Capital
Answer: Option B
Explanation:In the secondary market, Buyers and sellers transact in existing securities.
Q4
REPO is
[A]. Repurchase agreement
[B]. Representative of a company.
[C]. Reliance Petroleum
[D]. Repossess
Answer: Option A
Explanation:REPO rate is the rate at which RBI lends to commercial banks against their securities for short term needs.
Functions of Financial Markets
- Mobilisation of Savings and channeling them into the most productive uses.
- Helps in Price Determination.
- Provides Liquidity to Financial Assets.
- Reduces the Cost of Transactions.
Q5
Which of the following is not a money market security?
[A]. Treasury Bills
[B]. Certificate of deposit
[C]. Commercial paper
[D]. Kisan Vikas Patra
Answer: Option A
Explanation:Kisan Vikas Patra was issued by post offices but it has been discontinued now.
Q6
On which day, the stock exchange delivers the share or makes payment to the other broker?
[A]. Transaction day
[B]. Pay-in day
[C]. Pay-out day
[D]. None of the above
Answer: Option C
Explanation:Pay out really means that transaction is complete for both day.
Q7
After the trade has been executed, the broker issues a Contract Note to the investor within
[A]. 12 hours
[B]. 24 hours
[C]. 48 hours
[D]. 72 hours
Answer: Option B
Explanation:As per trading procedure of stock exchanges – this is the norm.
Q8
It is the market for short term funds which deals in assets whose period of maturity is upto 12 months.
[A]. Capital market
[B]. Primary market
[C]. Secondary market
[D]. Money market
Answer: Option D
Explanation:Money market is just the opposite of capital market. Money involved here is large whereas duration is only upto 12 months.
Instruments of Money Market
- Treasury Bills
- Commercial Paper
- Call Money
- Certificate of Deposit
- Commercial Bill
Q9
Who issues a treasury bill?
[A]. Reserve Bank of India
[B]. Post office
[C]. Commercial Banks
[D]. Industrial banks
Answer: Option A
Explanation:The Government of India has authorized RBI to issue treasury bills.
Q10
Only high net worth companies can use this method to finance/borrow funds.
[A]. Trade bills
[B]. Treasury bills
[C]. Call money
[D]. Commercial papers
Answer: Option D
Explanation:Only reliable companies can borrow funds for bridge financing through CPs.
Q11
The method by which banks borrow from each other to adhere to CRR requirement
[A]. SLR
[B]. Call money
[C]. Certificate of deposit
[D]. Open market operations
Answer: Option B
Explanation:CRR has to be maintained at the rate prescribed by RBI. For this purpose, sometimes, commercial banks may need to borrow from each other for short term needs.
Q12
A rise in call money rates makes other sources of finance such as commercial paper and certificates of deposit
[A]. Cheaper
[B]. Expensive
[C]. No effect
[D]. Both [a] and [b]
Answer: Option A
Explanation:There is an inverse relation between call money rates and other sources of finance.
Floatation of New Issues in Primary Market
1. Offer through Prospectus/ Initial Pubic Offer.
2. Offer for Sale.
3. Private Placements.
4. Rights Issue.
5. e-IPOs.
Q13
Companies finance their credit sales using this method of finance.
[A]. Call money
[B]. Trade bills/ Commercial bills
[C]. Commercial papers
[D]. Certificate of deposit
Answer: Option B
Explanation:Trade bills are used to further trade and improve volume of sales.
Q14
Which of the following are participants representing capital market?
[A]. Development banks
[B]. Commercial banks
[C]. Stock exchanges
[D]. All of the above
Answer: Option D
Explanation:Institutions having large funds are participants of capital market.
Q15
A company can raise capital through the primary market by way of
[A]. Debentures
[B]. Preference shares
[C]. Equity shares
[D]. All of the above
Answer: Option D
Explanation:The term primary market refers to first issue by the company directly to the person’s willing to acquire the securities – these could be any type of shares/debenture.
Q16
The process of holding shares in electronic form is known as
[A]. Speculation
[B]. Demonetisation
[C]. Dematerialisation
[D]. Demutualisation
Answer: Option C
Explanation:Every investor has to open a Demat account these days because shares are held electronically these days.
Functions of a Stock Exchange
1. Providing liquidity and Marketability to Existing Securities.
2. Pricing of Securities.
3. Safety of Transaction.
4. Contributes to Economic Growth.
5. Spreading of Equity Culture.
6. Providing Scope for Speculation.
Q17
Which type of functions does SEBI performs?
[A]. Protective
[B]. Regulatory
[C]. Developmental
[D]. All types
Answer: Option D
Explanation:SEBI was established primarily to protect the interest of investors as well as other stake holders but it also registers and regulates brokers and other intermediaries and has taken up the role of developing the stock exchanges in proper a manner.
Q18
This number is assigned to each transaction by the stock exchange and printed on the contract note.
[A]. Contract account number
[B]. Serial order number
[C]. Transaction ID
[D]. Unique order code
Answer: Option D
Explanation:Though the option other than [d] look similar. Hence, option [d] is right answer.
Q19
Which of the below mentioned statement is a protective function of stock exchange?
[A]. Controlling insider trading
[B]. Regulating take-over bids by larger companies
[C]. Keeping a close watch on malpractices by brokers
[D]. All of the above
Answer: Option D
Explanation:All of the above.
Q20
The ………. keeps securities in electronic form on behalf of the investor?
[A]. Stock exchange
[B]. Bank locker
[C]. Depository
[D]. SEBI
Answer: Option C
Explanation:The depository holds securities on behalf of investors. The stock exchange and SEBI perform the function of watchdog.
Trading and Settlement Procedure
1. Selection of Broker.
2. Opening Demat Account with Depository.
3. Placing the order.
4. Executing the order.
5. Settlement.
How is this topic related to the previous topic financial management?
Just as the topics planning and controlling are inter-related, the topics financial management and financial markets related to each other. MCQs can be made in such a manner that they cover both topics.
Is it sufficient to revise the chapter by doing only MCQs?
MCQs help the students in revising the topics. They are an aid or supplement to boost knowledge of students. However, if the examination is completely MCQs based, then the important of MCQs rises manifold.
What are the important sub-topics in this chapters financial market for preparing MCQs?
The sub-topics money market instruments, difference between capital market and money market and trading procedure on stock exchange are to be learnt thoroughly.
