Financial Markets Function

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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?

Channeling savings from investors to entities that need funds Signup and view all the answers

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

The market forces of supply and demand Signup and view all the answers

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

Investors will have to hold their financial securities until maturity Signup and view all the answers

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

QIP 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?

30 days Signup and view all the answers

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

To ensure compliance with DIP guidelines 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?

Rs. 50 lakhs Signup and view all the answers

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

Meeting the minimum public float requirement Signup and view all the answers

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

For record purposes Signup and view all the answers

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

Rs. 25 crores Signup and view all the answers

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

To provide liquidity in the corporate bond market Signup and view all the answers

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

To promote the use of bills culture in the economy Signup and view all the answers

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

To manage collateral on behalf of other parties Signup and view all the answers

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

At least 5 years Signup and view all the answers

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

Scheduled commercial banks, recognised stock exchanges and clearing corporations 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?

The shareholder must hold shares in dematerialized form. Signup and view all the answers

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

To provide a speedy method of private placement for companies to raise money. Signup and view all the answers

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

To block funds in a bank account for application money. Signup and view all the answers

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

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. Signup and view all the answers

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

May 8, 2006 Signup and view all the answers

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

It enables them to raise money from domestic markets in a short span of time. Signup and view all the answers

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

To keep the value of their currencies within the limits defined by their monetary policies Signup and view all the answers

What is the primary source of funds for sovereign funds?

Proceeds from business privatisations and natural resources Signup and view all the answers

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

To engage in speculative activities or obtain returns Signup and view all the answers

Why do individuals participate in the foreign exchange market?

For transactional hedging or speculative purposes Signup and view all the answers

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

To serve as a benchmark rate for financial transactions Signup and view all the answers

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

Due to criticisms and irregularities Signup and view all the answers