Business Studies MCQs for Class 12 with Answers Chapter 10 Financial Market

Free PDF Download of CBSE Business Studies Multiple Choice Questions for Class 12 with Answers Chapter 10 Financial Market. Business Studies MCQs for Class 12 Chapter Wise with Answers PDF Download was Prepared Based on Latest Exam Pattern. Students can solve NCERT Class 12 Business Studies Financial Market MCQs Pdf with Answers to know their preparation level.

Financial Market Class 12 Business Studies MCQs Pdf

1. Which of the following statements is not true with regard to money market?
(a) It involves low market risk.
(b) It is situated at specific locations.
(c) Deals in unsecured and short-term debt instruments.
(d) The instruments traded are highly liquid.

Answer/Explanation

Answer: b
Explanation:
(b) it has no physical locations


Financial Market with Answers

2. Which of the following statements is not true with regard to Treasury bills?
(a) Are issued in the form of a promissory note.
(b) They are highly liquid and have assured yield
(c) They carry high risk of default.
(d) They are available for a minimum amount of ₹25,000 and in multiples thereof.

Answer/Explanation

Answer: c
Explanation:
(c) they carry no risk of default


Financial Market

3. Which of the following statements is not true with regard to Commercial paper?
(a) Is a long-term unsecured promissory note with a fixed maturity period.
(b) It usually has a maturity period of 15 days to one year.
(c) It is sold at a discount and redeemed at par.
(d) Companies use this instrument for bridge financing.

Answer/Explanation

Answer: a
Explanation:
(a) it is a short-term instrument


4. Which of the following statements is not true with regard to Call money?
(a) It is short-term finance repayable on demand.
(b) Its maturity period ranges from one day to fifteen days.
(c) There is a direct relationship between call rates and other short-term money market instruments.
(d) It is used for inter-bank transactions.

Answer/Explanation

Answer: c
Explanation:
(c) There is an inverse relationship between call rates and other short-term money market instruments


5. Which of the following statements is not true with regard to primary market?
(a) Is also known as the old issues market.
(b) It facilitates the transfer of investible funds from savers to entrepreneurs.
(c) It deals with new securities being issued for the first time.
(d) It facilitates the transfer of investible funds from savers to entrepreneurs.

Answer/Explanation

Answer: a
Explanation:
(a) it is a new issue market


6. Which of the following statements is not true with regard to capital market?
(a) The funds are raised for a short period of time.
(b) Both debt and equity funds can be raised.
(c) It is classified into two types.
(d) All of the above.

Answer/Explanation

Answer: a
Explanation:
(a) it deals in long term funds


7. Which of the following statements is not true with regard to stock exchange?
(a) It provides a platform for buying and selling of new securities.
(b) It curbs the marketability of the securities.
(c) By providing a ready market, it extends liquidity to the securities.
(d) It provides a platform for buying and selling of old securities.

Answer/Explanation

Answer: b
Explanation:
(b) it promotes marketability of shares


8. Which of the following is not a protective function of stock exchange?
(a) Prohibition of fraudulent and unfair trade practices.
(b) Controlling insider trading.
(c) Regulation of takeover bids by companies.
(d) Promotion of fair practices and code of conduct in securities market.

Answer/Explanation

Answer: c
Explanation:
(c) it is regulatory function


9. Raj Enterprises wishes to invest ₹1,10,000 in treasury bills. What is the maximum number of treasury bills it can buy with this fund?
(a) 6
(b) 7
(c) 4
(d) 2

Answer/Explanation

Answer: c
Explanation:
(c) because it is issued for ₹25,000 and in multiples there off


10. Which of the following statements is true with regard to financial markets?
(a) They link the households which save funds and business firms which invest these funds.
(b) They work as an intermediary between the savers and the investors by mobilising funds between them.
(c) They allocate funds available for investment into their most productive investment opportunity.
(d) All of the above

Answer

Answer: d


11. The allocated function is performed by
(a) Financial market
(b) Capital market
(c) Money market
(d) All of the above

Answer

Answer: d


12. It is a market for short-term funds which deals in monetary assets whose period of maturity is up to one year.
(a) Primary market
(b) Secondary market
(c) Capital market
(d) Money market

Answer

Answer: d


13. It is an instrument of short-term borrowing by the Government of India maturing in less than one year.
(a) Commercial bill
(b) Treasury bill
(c) Call money
(d) None of the above

Answer

Answer: b


14. Who issues a treasury bill?
(a) Any nationalised bank
(b) Any private sector bank
(c) Reserve Bank of India
(d) All of the above

Answer

Answer: c


15. Suppose an investor purchases a 91 days Treasury bill with a face value of ₹2,00,000 for ₹1,92,000. By holding the bill until the maturity date, the investor receives ₹2,00,000. What is the amount of interest received by him?
(a) ₹8,000
(b) ₹80,000
(c) ₹3,92,000
(d) ₹2,00,000

Answer

Answer: a


16. It is used as an alternative to bank borrowing for large and creditworthy companies,
(a) Commercial bill
(b) Commercial papers
(c) Call money
(d) None of the above

Answer

Answer: b


17. It is a method by which banks borrow from each other to be able to maintain the cash reserve ratio.
(a) Commercial bill
(b) Commercial papers
(c) Call money
(d) None of the above

Answer

Answer: c


18. A rise in call money rates makes other sources of finance such as commercial paper and certificates of deposit
(a) Expensive in comparison with banks who raise funds from these sources.
(b) Cheaper in comparison with banks who raise funds from these sources.
(c) Creates no effect on other sources.
(d) None of the above

Answer

Answer: b


19. It is a short-term, negotiable, self-liquidating instrument which is used to finance the credit sales of firms.
(a) Commercial bill
(b) Commercial papers
(c) Call money
(d) None of the above

Answer

Answer: a


20. The capital market consists of
(a) Development banks
(b) Commercial banks
(c) Stock exchanges
(d) All of the above

Answer

Answer: d


21. A company can raise capital through the primary market in the form of
(a) Equity shares
(b) Preference shares
(c) Debentures
(d) All of the above

Answer

Answer: d


22. They can be issued to individuals, corporations and companies during periods of tight liquidity when the deposit growth of banks is slow but the demand for credit is high.
(a) Commercial papers
(b) Call money
(c) Commercial bill
(d) Certificate of deposit

Answer

Answer: d


23. Which of the following participants represent capital market?
(a) Development banks
(b) Commercial banks
(c) Stock exchanges
(d) All of the above

Answer

Answer: d


24. Under this method of floatation in primary market, a subscription is invited from general public to invest in the securities of a company through the issue of advertisement.
(a) Private placement
(b) Offer through prospectus
(c) Offer for sale
(d) All of the above

Answer

Answer: b


25. PK Enterprises Limited has sold an entire lot of 5,00,000 equity shares @ ₹9 each to Prosperous Bank Private Limited. The bank intum will offer the shares to general public for subscription @ ₹11 per share. Identify the method of floatation being described in the given lines.
(a) Private placement
(b) Offer through prospectus
(c) Offer for sale
(d) Rights issue

Answer

Answer: c


26. Jaykant is holding hundred shares of a company. He has been given a privilege offer to subscribe to a new issue of shares of the same company in proportion of 2:1 to the number of shares already possessed by him. Identify the method of floatation being described in the above case.
(a) Offer through prospectus
(b) Offer for sale
(c) Rights issue
(d) Private placement

Answer

Answer: c


27. Stock Exchange works as a mechanism for valuation of securities through the forces of demand and supply. Identify the related function of performed by the stock exchanges.
(a) Providing liquidity and marketability to existing securities.
(b) Safety of transaction.
(c) Pricing of security.
(d) Spreading of equity cult.

Answer

Answer: c


28. Stock exchanges provide an opportunity to the investors to disinvest and invest. Identify the related function of the stock exchange.
(a) Providing scope for speculation.
(b) Providing liquidity and marketability to existing securities.
(c) Pricing of security.
(d) Spreading of equity cult.

Answer

Answer: b


29. The process of holding shares in electronic form is known as
(a) Demutualisation
(b) Dematerialisation
(c) Speculation
(d) None of the above

Answer

Answer: b


30. One of the common irregularities noted by the Securities and Exchange Board of India during the inspection of a stock exchange was that it was dealing with unregistered sub-brokers. Identify the related function of Securities and Exchange Board of India
(a) Regulatory function
(b) Protective function
(c) Developmental function
(d) None of the above

Answer

Answer: a


31. It acts like a bank and keeps securities in electronic form on behalf of the investor,
(a) Depository Participant
(b) Depository
(c) Stock exchange
(d) None of the above

Answer

Answer: b


32. It serves as an intermediary between the investor and the depository who is authorised to maintain the accounts of dematerialised shares.
(a) Depository Participant
(b) Depository
(c) Stock exchange
(d) None of the above

Answer

Answer: a


33. It is a number assigned to each transaction by the stock exchange and is printed on the contract note.
(a) PAN number
(b) Unique Order Code
(c) Contract Note
(d) None of the above

Answer

Answer: b


34. Identify the correct sequence of steps to be followed in the trading procedure at Stock Exchange
(a) Opening a trading account and Demat account, Placing an order, Settlement of order, Execution of order
(b) Settlement of order, Opening a trading account and Demat account, Placing an order, Execution of order
(c) Opening a trading account and Demat account, Placing an order, Execution of order, Settlement of order
(d) Placing an order, Opening a trading account and Demat account, Execution of order, Settlement of order

Answer

Answer: c


35. The mandatory detail that an investor has to provide to the broker at the time of opening a demat account is
(a) Date of birth and address
(b) PAN number
(c) Residential status (Indian/NRI)
(d) Bank account details.

Answer

Answer: b


36. It is a legally enforceable document which is issued by a stock broker within 24 hours of the execution of a trade order.
(a) PAN number
(b) Unique Order Code
(c) Contract Note
(d) None of the above

Answer

Answer: c


37. On this day, the exchange will deliver the share or make payment to the other broker,
(a) Pay-in day
(b) Pay-out day
(c) Transaction day
(d) None of the above

Answer

Answer: b


38. When is a trade confirmation slip issued to the investor?
(a) On placing an order
(b) On execution of the order
(c) On settlement of the order
(d) None of the above

Answer

Answer: b


39. After the trade has been executed, the broker issues a Contract Note to the investor within
(a) 52 hours
(b) 24 hours
(c) 48 hours
(d) 12 hours

Answer

Answer: b


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One best Example for Financial Market is Nr7 Pattern