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Questions and Answers
What is the purpose of Repurchase Agreements (Repo)?
What is the maturity period of a Banker's Acceptance?
What is the main purpose of the Capital Market?
What is the relationship between the Capital Market and the Money Market?
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What is the primary purpose of the Statutory Liquidity Ratio (SLR)?
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What is the main function of the Banker's Acceptance?
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What is the primary characteristic of the Money Markets?
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Which financial market trades securities based on the value of its primary asset?
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What is the main characteristic of the Forex Market?
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How does the financial market contribute to reducing costs for parties involved?
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In which market are fixed bonds and debentures exchanged between investors?
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Based on the text, which financial market is known for being the most liquid?
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What is the main reason why returns on debt securities are lower than the returns in the equities market?
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What is the main issue with the retail debt market mentioned in the text?
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Why do traders in debt securities need to take larger positions to achieve the same level of profits as traders in stocks or commodities?
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What advantage do the large financial institutions and hedge funds have over individual traders in the debt trading markets?
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What is the potential upside for traders in corporate debt securities who trade high-yield or junk bonds?
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What is the main downside of trading in high-yield or junk bonds?
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What is the primary function of money markets?
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Which of the following is NOT a characteristic of money markets?
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What is the primary role of capital markets?
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Which of the following markets is responsible for facilitating international commerce through currency exchange?
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What is the primary benefit of efficient financial markets, according to the passage?
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Which of the following statements about money market instruments is NOT true?
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What is the purpose of the New Issue Market (NIM)?
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Which of the following statements is true about the Debt Market?
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In the New Issue Market (NIM), what is the role of underwriters or investment bankers?
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How is the price of securities determined in the New Issue Market (NIM)?
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What happens to the funds raised by a company in the New Issue Market (NIM)?
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How does the Indian Debt Market differ from other debt markets?
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Study Notes
Financial Markets Overview
- Financial markets provide short-term loan finance for businesses and households, inter-bank lending, and international commerce.
- They create liquidity, reduce risk, and smooth economies by creating investor confidence.
Money Market
- Enables trading of short-term debt investments at wholesale and retail levels.
- Includes negotiable instruments like certificates of deposits, commercial papers, and treasury bills.
- Considered a safe haven for investment due to highly liquid securities.
New Issue Market (NIM) / After Issue Market (AIM)
- Also known as direct type of purchase, trading between companies and investors.
- Finances existing companies for expansion and growth.
Debt Market
- A market where fixed income securities of various types and features are issued and traded.
- In India, the Government debt market is well developed in terms of instruments, size, participants, and regulatory framework.
Classification of Financial Market
- By Nature of Claim:
- Debt Market: trades fixed bonds and debentures.
- Equity Market: trades equity.
- By Maturity of Claim:
- Money Markets: trades high liquid and short maturities (less than a year).
- Derivatives Market: trades securities that determine its value from its primary asset.
- Forex Market: trades currencies (most liquid financial market).
Functions of Financial Market
- Mobilizes savings by trading in productive methods.
- Assists in deciding securities' prices through demand and supply.
- Provides liquidity to bartered assets and reduces cost by giving valuable information.
Capital Market
- A financial market for creation and exchange of financial assets.
- Subdivided into Primary and Secondary Market, comprising Equity and Debt.
- Returns are risk-free but relatively low compared to equities.
Debt Securities
- Have smaller price changes compared to stocks or commodities.
- Traders must take larger positions to achieve the same level of profits.
- Dominated by hedge funds and large financial institutions.
- High-yield bonds offer higher interest rates but come with the risk of bankruptcy.
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Description
Test your knowledge on different types of financial markets including Money Markets, Derivatives Market, and Forex Market. Learn about trading securities, derivatives, currencies, and more in this quiz.
