Financial Markets Function

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Questions and Answers

What is the primary function of financial markets in allocating funds?

  • Sharing risks between investors and entities
  • Determining the fair value of financial instruments
  • Matching lenders with entities in need of funds (correct)
  • Providing liquidity to investors

What would happen if there is no liquidity in the financial market?

  • Investors can sell their financial instruments at any time (correct)
  • Entities will not be able to raise funds through financial markets
  • Financial markets will cease to function
  • Investors will have to hold their financial securities until maturity

What is the benefit of risk sharing in financial markets?

  • Investors can earn higher returns without taking risks
  • Financial markets become more volatile
  • Entities can undertake investments without risks
  • Risks are transferred from entities to investors (correct)

What is the role of financial markets in mobilizing savings?

<p>Channeling savings from investors to entities that need funds (C)</p> Signup and view all the answers

What determines the fair value of financial instruments in financial markets?

<p>The market forces of supply and demand (D)</p> Signup and view all the answers

What is the consequence of a lack of liquidity in financial markets?

<p>Investors will have to hold their financial securities until maturity (D)</p> Signup and view all the answers

Which type of issue is subject to a minimum public float requirement?

<p>QIP (C)</p> Signup and view all the answers

What is the minimum time period required for filing a draft letter of offer with the Board before filing with the Designated Stock Exchange?

<p>30 days (D)</p> Signup and view all the answers

What is the primary role of a merchant banker in the issue of securities?

<p>To ensure compliance with DIP guidelines (C)</p> Signup and view all the answers

What is the maximum aggregate value of securities that can be issued through a rights issue without filing a draft letter of offer with the Board?

<p>Rs. 50 lakhs (D)</p> Signup and view all the answers

Which of the following is not a requirement for a listed company making a public issue of securities?

<p>Meeting the minimum public float requirement (B)</p> Signup and view all the answers

What is the purpose of filing a copy of the placement document with SEBI in a QIP?

<p>For record purposes (D)</p> Signup and view all the answers

What is the minimum paid-up equity share capital required for a tri-party agent?

<p>Rs. 25 crores (C)</p> Signup and view all the answers

What is the primary purpose of introducing tri-party repo in the market?

<p>To provide liquidity in the corporate bond market (B)</p> Signup and view all the answers

What is the Bills Rediscounting Scheme (BRDS) primarily used for?

<p>To promote the use of bills culture in the economy (D)</p> Signup and view all the answers

What is the primary function of a tri-party agent?

<p>To manage collateral on behalf of other parties (A)</p> Signup and view all the answers

How many years of experience are required to become a tri-party agent?

<p>At least 5 years (B)</p> Signup and view all the answers

What type of institutions are eligible to become tri-party agents?

<p>Scheduled commercial banks, recognised stock exchanges and clearing corporations (B)</p> Signup and view all the answers

What is the primary requirement for a shareholder to apply for entitlements or additional shares in a rights issue using ASBA?

<p>The shareholder must hold shares in dematerialized form. (A)</p> Signup and view all the answers

What is the purpose of Qualified Institutional Placement (QIP)?

<p>To provide a speedy method of private placement for companies to raise money. (A)</p> Signup and view all the answers

What is the role of a Self-Certified Syndicate Bank (SCSB) in the ASBA process?

<p>To block funds in a bank account for application money. (C)</p> Signup and view all the answers

What is the main difference between a rights issue and a Qualified Institutional Placement (QIP)?

<p>A rights issue is a method of raising money from existing shareholders, while a QIP is a method of raising money from qualified institutional buyers. (C)</p> Signup and view all the answers

When was the guideline for Qualified Institutional Placement (QIP) instituted by SEBI?

<p>May 8, 2006 (A)</p> Signup and view all the answers

What is the primary benefit of Qualified Institutional Placement (QIP) to listed companies?

<p>It enables them to raise money from domestic markets in a short span of time. (A)</p> Signup and view all the answers

What is the primary reason for Central Banks' intervention in currency markets?

<p>To keep the value of their currencies within the limits defined by their monetary policies (C)</p> Signup and view all the answers

What is the primary source of funds for sovereign funds?

<p>Proceeds from business privatisations and natural resources (B)</p> Signup and view all the answers

What is the main purpose of hedge funds and investment entities in foreign exchange markets?

<p>To engage in speculative activities or obtain returns (B)</p> Signup and view all the answers

Why do individuals participate in the foreign exchange market?

<p>For transactional hedging or speculative purposes (A)</p> Signup and view all the answers

What was the purpose of the London Interbank Offered Rate (LIBOR)?

<p>To serve as a benchmark rate for financial transactions (C)</p> Signup and view all the answers

What was the reason for replacing LIBOR as a financial benchmark rate?

<p>Due to criticisms and irregularities (B)</p> Signup and view all the answers

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