About Financial Markets

Bonds, equities, stocks, and currencies are all exchanged in a financial market. Only a few financial markets handle trillions of dollars in daily security business transactions, while others are smaller and less active.

Definition of Financial Market

There are several marketplaces where securities are traded in the financial sector, including the stock exchange, the bond market, the foreign exchange market, and many more. Economies based on capitalism cannot function without financial markets. Smaller financial markets with less activity are more common, but only a tiny number of them transact securities transactions worth trillions of dollars every single day. This is a market where firms can increase their cash flow, corporations can reduce their risks, and investors can increase their cash flow.

Meaning of Financial Markets

The stock market is a financial market that allows investors to buy and sell publicly traded company shares. The main stock market is where new stocks are originally launched, while the secondary stock market is where stock securities are traded.

Types of Financial Markets

  • Over the Counter (OTC) Market
  • Bond Market
  • Money MarketsDerivati
  • Derivatives
  • Forex Market

Functions of Financial Market

  • Securities pricing is influenced by market forces such as supply and demand and the opinions of investors. Markets, where financial assets and securities can be traded, are referred to as Financial Markets. It distributes the country's scarce resources. It acts as a go-between for investors and collectors, facilitating the transfer of funds.
  • Gives barter assets a boost in liquidity
  • More efficient use of resources since parties do not have to expend additional resources in order to locate potential customers for the exchange of securities. It also saves money since it provides useful details about the financial instruments that are exchanged there
  • Using the most productive means of exchange, helps people make use of their money.

Following are some of the multiple choice questions on the Financial Markets with answers that will help the students in developing their knowledge.

Financial Markets MCQ

1. All activities related to finance and organized into a system called ‐‐‐‐----‐‐‐‐‐‐‐‐.

  • Capital market
  • Money market
  • Financial system
  • open market

2. Which agency regulates and supervises NBFCs?

  • Finance Ministry
  • SEBI
  • RBI
  • Respective state government

3. A Treasury Bill is basically:

  • An instrument to borrow short-term funds
  • An instrument to borrow long-term funds
  • An instrument of capital market
  • None of the above

4. The objectives of SEBI include -------------.

  • To protect interests of inventors
  • To regulate securities market
  • To regulate securities market
  • All of the above

5. Which of the following instruments is not traded in a money market?

  • Banker’s acceptances
  • U.S. Treasury Bills
  • Eurodollars
  • Residential mortgages

6. The first computerized online stock exchange in India was

  • NSE
  • BSE
  • MCX

7. The main characteristics of money market transactions which enables it to have active secondary market are:

  • Securities that trade in one year or less
  • Securities that are of large denomination
  • Securities that are very liquid
  • All above

8. Listing is mandatory for ------------------.

  • Trading in stock market
  • Marketing a new issue
  • Trading in international markets
  • Declaring dividend

9. Who appoints the chairman of SEBI?

  • Central government
  • Stock exchanges
  • Brokers
  • Investors

10. ‐‐‐‐‐‐‐‐‐‐‐‐‐‐ is the market where the existing securities of companies are traded.

  • Primary market
  • Secondary market
  • Money market
  • None of these

11. Which tends to be riskier, stocks or bonds?

  • Stocks
  • Bonds
  • Neither are risky
  • Both are equally risky

12. Which of these is NOT a derivative instrument?

  • Future
  • Forward
  • Bond
  • Options

13. Which of the following is included in the financial assets?

  • Shares
  • Debentures
  • Treasury bill
  • All the above

14. It is necessary for an investor to obtain Certificate of Deposits for ™ ________lakh.

  • 5
  • 10
  • 25
  • 50

15. Who is the current governor of RBI?

  • Rajeev Kumar
  • Udit Mehta
  • M.S. Rama Rao
  • Shaktikanta Das

16. Securities of ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐ companies are traded in secondary market.

  • Listed
  • Relisted
  • Unlisted
  • None of these

17. OTCEI stands for Over the Counter ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐ of India.

  • Exchange
  • Expand
  • Extent
  • None of these

18. Secondary market deals with the ________ of existing securities.

  • Purchase
  • Sale
  • Purchase-sale
  • Stock

19. Call money or call loans are ________ .

  • Fixed
  • Liquid
  • Costly
  • Cheap

20. Maturity period to call money is

  • 1 to 14 days
  • 15 to 90 days
  • 15 to 1 years
  • 1 to 30 days

21. A person who buys or sells equities for his or her clients is a

  • Insurance agent
  • financial advisor
  • stockbroker
  • accountant

22. Those who want to borrow money to purchase items such as houses and items.

  • Borrower
  • Lender
  • Relative
  • None of these

23. The amount that a bond issuer promises to pay the buyer at maturity.

  • Par value
  • coupon rate
  • Capital gain
  • return

24. ________ is a part of capital market.

  • Call Money
  • Primary Market
  • Secondary Market
  • Primary and Secondary Market

25. At present only two depositories are registered with SEBI .

  • True
  • False

26. Dinesh has 100 equity shares of a company. He wants to sell 50 of these shares. Which market should he approach?

  • Secondary market
  • Primary market
  • Forex markets
  • Money market

27. Who is known as Lender of the last Resort?

  • SEBI
  • RBI
  • SBI
  • NSE

28. IPO stands for ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐.

  • Initial Public Offer
  • Initial Public Offering
  • Individual Public offer
  • none of these

29. Which is the major part of financial system?

  • Financial market
  • Financial institutions
  • Financial securities
  • All of above

30. When it comes to investments in general, the higher the ____ the higher the potential reward.

  • Security
  • Cost
  • Risk
  • Damage

31. Regulator of Secondary market is

  • RBI
  • SEBI

32. Which of the following words does not belong to the stock exchange?

  • KPO
  • NAV
  • NSE
  • IPO



34. Which of the following is not capital market instruments?

  • Commercial paper
  • Stocks
  • Corporate bonds
  • Mortgage 

35. Which is term of where buyers and sellers of securities meet in one central location to conduct trades?

  • Over the counter
  • Exchange 
  • Transactions 
  • Barter system

36. Dinesh has 100 equity shares of a company. He wants to sell 500 of these shares. Which market should be approach?

  • Secondary market
  • Primary market
  • Financial markets
  • Money market

37. An ideal Capital market is one

  • Where finance is available at higher cost
  • Must provide insufficient information to investors
  • Where market operations are inconsistent
  • Which facilitates economic growth

38. Types of Speculators

  • Bull
  • Stag
  • Lame Duck
  • All of the above

39. What is the term describing an overall decrease in stock prices?

  • A bull market
  • Market capitalization
  • Market diversification
  • A bear market

40. What are these? NYSE - NASDAQ

  • stocks
  • markets
  • stock exhanges
  • securities and exchanges

41. Shares of stock from a variety of companies that you own are called?

  • Dividend
  • Portfolio
  • Commission
  • Diversity

42. When stocks overall are rising, the market is called?

  • A bull market
  • A bear market
  • market capitalization
  • market diversification

43. The government agency responsible for regulating the stock market?

  • Federal Reserve Board
  • Federal Trade Commission
  • Interstate Commerce Commission
  • Securities and Exchange Commission

44. Term that refers to the total value of all a company's shares of stock. It is calculated by multiplying the price of a stock by its total number of outstanding shares.

  • market Volatility
  • Market Diversification
  • Market Capitalization
  • Market Socialization

45. Which of the following cannot accept Demand Deposits?

  • Commercial Banks
  • Foreign Banks
  • Local area Banks
  • NBFC

46. NBFC does not Include

  • Agriculture activity
  • Sale of Immovable property
  • Industrial Activity
  • All of the above

47. Financial Market is classified into

  • Organized and unorganized market
  • Regulatory and non-regulatory market
  • Reformatory and non-reformatory market
  • Controlled and uncontrolled Market

48. Indian Financial System is a link between

  • Borrowers and seekers of fund
  • Bank and agent
  • Businessman and RBI
  • Insurance and banking

49. A short term debt obligation backed by govt.with a maturity of less than 1 year.

  • Treasury Bill
  • Bills of Payment
  • Certificate of Savings
  • Certificate of Ownership

50. Primary market deals with selling of securities for the first time through the following method

  • Book building
  • Investor issue
  • Bonus declaration method
  • Employee stock issue

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