Financial Markets

Previous Years' CBSE Board Questions

10.1 Financial Markets: Concept

LA (5 marks)

1. What is meant by 'Financial Market'? State any four functions of financial market. (Term-II, 2021-22) R

10.2 Money Market: Concept

SAI (3 marks)

(2023) An

2 Currently, the banking sector in the Indian economy is facing lots of problems. The rates of interest that banks are paying on deposits have sharply decreased: as a result banks are able to collect lesser amounts of deposits. Due to the policies of the Reserve Bank of India, lending rates have also decreased. The automobile industry is also facing a lot of problems and thus they have also reduced the prices of cars. This has encouraged people to take car loans from banks as the interest rates on loans, along with prices of cars in the automobile sector are declining. Due to this position of tight liquidity, 'The Oberoi Bank Ltd.' decided to raise funds by issuing an unsecured, short-term instrument which could be purchased by corporations, companies and individuals.

1. Identify and explain the money market instrument used by 'The Oberoi Bank Ltd.' to raise funds.
2. Also explain the money market instrument used by the banks to maintain Cash Reserve Ratio.

(2020 C)

LA (5 marks)

1. Explain Treasury Bill and 'Call Money' as instruments of 'Money Market' (Term-II, 2021-22 C)

10.3 Capital Market and Its Types (Primary and Secondary)

MCQ

1. Adapting to a change in consumer preference towards online shopping, 'Fast-Service' started a grocery delivery app. It is a platform that ensures
2. minute deliveries of groceries. Because of this service, 'Fast-Service' earned huge profit within a year. It planned to expand its operations and decided to raise funds by directly issuing its securities to investors.

The market through which 'Fast-Service' has decided to raise funds for its expansion is

1. Money market
2. Primary market
3. Secondary market
4. Both Primary and Secondary markets (2023)

Capital Market instruments are riskier both with

respect to returns and principal repayment as

compared to Money Market instruments.

This highlights the following point of difference

between 'Capital Market' and Money Market':

1. Instruments
2. Duration
3. Safety
4. Liquidity.

Read the following paragraph and answer question nos.

6-9 on the basis of the same:

Mayank Ltd. is a real estate company. Since its

establishment, the company acquired a good market

share. With the boom in the Indian economy, the real

estate sector is also witnessing a boom due to lower

interest rates on housing loans and accompanying

income-tax concessions.

For meeting this increasing demand, the finance manager

of the company suggested to raise ₹ 1,250 crore by

issuing shares and ₹ 750 crore by way of loan from the

bank. He was of the opinion that this will increase per

share earnings of the shareholders. The directors of

the company wanted to raise capital more quickly and

suggested that it would be better to allot the securities

to some selected individuals. They also suggested that

instead of taking loan from the bank the privilege can be

given to existing shareholders to subscribe to a new issue

of shares for ₹ 750 crore. (2021 C) Ap

1. The method of raising ₹1,250 crore suggested by the finance manager is:
2. Offer for sale
3. Offer through prospectus
4. Private placement
5. e-IPOs.

'The directors of the company wanted to raise capital

more quickly and suggested that it would be better

to allot the securities to some selected individuals.

In the above lines the method of floatation of new

issues suggested by the directors is:

1. Offer for sale
2. Offer through prospectus
3. Private placement
4. e-IPOs.
5. 'They also suggested that instead of taking loan from the bank the privilege can be given to existing shareholders to subscribe to a new issue of shares for ₹750 crore:0

The method of floatation of new issues discussed in

the above lines is:

1. Offer for sale
2. Offer through prospectus
3. Private placement
4. Rights issue.

1. The market through which the financial manager and the directors wanted to collect funds is:
2. Money Market (b) Capital Market
3. Both (a) and (b) (d) Neither (a) nor (b).

VSA (2 marks)

1. 'Gujarat Textiles Ltd.' needs to raise a fund of ₹80 crore. It cannot afford the cost of public issue, so it was decided to allot its equity shares to institutional investors like LIC and some selected investors. Identify and explain the method of floating new issues used by Gujarat Textiles Ltd.

(Term-II, 2021-22) (Ap)

SAI (3 marks)

Explain 'Offer for Sale' and 'Rights Issue' as methods of floatation of new issues in the primary market. (Term-II, 2021-22 C)

'Financial markets are classified on the basis of the maturity of financial instruments traded in them'. Name the market in which the instruments with more than one year maturity are traded. Also state any two features of this market. (Delhi 2019) OR State any four functions of 'Stock Exchange'.

(Delhi 2016, Al 2016) R

(5 marks) 10.5 Securities and Exchange Board

of India (SEBI)- Objectives and

Functions

1. Differentiate between 'Capital market' and 'Money market' on the following basis:
2. Participants; (ii) Instruments:
3. Investment outlay; (iv) Duration and
4. Liquidity. (Delhi 2014, Delhi 2014 C)

VSA (2 marks) OR Differentiate between 'capital market' and 'money market' on the basis of :

1. Safety: (ii) Expected return;
2. Meaning: (iv) Instruments and
3. Duration (Delhi 2014)

SAI (3 marks)

201 (6 marks)

Distinguish between Primary market and secondary market. (AI 2015 C)

10.4 Stock Exchange: Functions and Trading Procedure

1. Name the depositories that hold securities in electronic form. (2023)
2. The stock Exchange performs many vital function in today's commercial world? Explain any three such functions. (Al 2015)

SAII (4 marks)

Stock exchange acts as a regulator of the securities

market. It creates a continuous market where the

securities are bought and sold. It gives investors the

chance to disinvest and reinvest. Through this pro-

cess of disinvestment and reinvestment, savings get

channelised into their most productive investment

avenues. To ensure that the investing public gets a

safe and fair deal in the market, the membership of

the stock exchange is well regulated and its deal-

ings are well defined according to the existing legal

framework. It also ensures wider share of ownership

by regulating new issues, better trading practices

and taking effective steps in educating the public

about investments. Various functions performed by the Stock Exchange

are discussed in the above para. By quoting lines

from above para, state any four functions of stock ex-

change. (AI 2019 C)

1. 'Training of intermediaries of the securities market' is a development function performed by Securities and Exchange Board of India.' State two other develop- ment function (Term-II, 2021-22 C)
2. State any three protective functions of Securities and Exchange Board of India. (2023) R
3. State any three objectives of Securities and Exchange Board of India. (2021 C)

Mr. Sanjay Nehra was the Chairman of 'Taran Bank.'

The bank was earning good profits. Sharehold-

ers were happy as the bank was paying regular

dividends. The market price of their share was also

steadily rising. The bank was about to announce tak-

ing over of 'Vena Bank'. Mr. Sanjay Nehra knew that

the share price of 'Taran Bank' would rise on this an-

nouncement. Being a part of the bank, he was not

allowed to buy shares of the bank. He called one

SAI (3 marks)

1. (i) Name the process of holding securities in an electronic form.
2. Name any two participants of Money Market.