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Capital Market Multiple-Choice Questions (MCQs)

A capital market is a financial market in which long-term debt or equity-backed securities are bought and sold, in contrast to a money market where short-term debt is bought and sold.

Capital Market MCQs: This section contains multiple-choice questions and answers on Capital Market. It will help the students to prepare well for their exams and to test their skills in the capital market.

List of Capital Market MCQs

1. What is Capital Market?

  1. Market in which securities are bought and sold.
  2. A financial market in which long-term debt or equity-backed securities are bought and sold.
  3. Entrepreneurs in one country copy an existing market.
  4. A market structure is defined by a large number of small firms competing against each other.

Answer: B) A financial market in which long-term debt or equity-backed securities are bought and sold

Explanation:

Capital business sectors are the place where reserve funds and ventures are diverted between providers—individuals or establishments with cash-flow to loan or contribute—and those out of luck.

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2. Who controls the Capital Market in India?

  1. SEBI
  2. NABARD
  3. RBI
  4. SBI

Answer: A) SEBI

Explanation:

The Capital Market in India is controlled by the Securities and Board Exchange of India.

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3. When was SEBI established in India?

  1. 1992
  2. 1985
  3. 1988
  4. 1995

Answer: C) 1988

Explanation:

The Securities and Exchange Board of India (SEBI) is the administrative body for the protection and ware market in India under the responsibility of the Finance, Government of India. It was set up on 12 April 1988 and given Statutory Powers on 30 January 1992 through the SEBI Act, 1992.

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4. What is the role of the Securities and Board Exchange of India?

  1. To promote individual businesses.
  2. Facilitating credit flow for promotion and development of agriculture, cottage, and village industries.
  3. The custodian of the foreign reserve, controller of credit, and managing printing and supply of currency notes in the country.
  4. Protect the interests of investors in securities.

Answer: D) Protect the interests of investors in securities

Explanation:

The Preamble of the Securities and Exchange Board of India depicts the essential elements of the Securities and Exchange Board of India as "...to ensure the interests of financial backers in protections and to advance the improvement of, and to manage the protections market and for issues associated therewith or coincidental there to".

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5. What is Sensex?

  1. A financial market in which long-term debt or equity-backed securities are bought and sold.
  2. The equity benchmark index of the National Stock Exchange.
  3. Figure indicating the relative prices of shares.
  4. None of the above.

Answer: C) Figure indicating the relative prices of shares

Explanation:

The term Sensex alludes to the benchmark list of the BSE in India. The Sensex is contained 30 of the biggest and most effectively exchanged stocks on the BSE and gives a check of India's economy.

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6. In which Market debt and stocks are traded and maturity period is more than a year?

  1. Money Market
  2. Share Market
  3. Short Term Market
  4. Capital Market

Answer: D) Capital Market

Explanation:

Capital business sectors are the place where reserve funds and ventures are diverted between providers—individuals or foundations with cash-flow to loan or contribute—and those out of luck. Providers commonly incorporate banks and financial backers while the people who look for capital are organizations, states, and people.

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7. What is Human Capital?

  1. Part of the country's current output and imports is not consumed or exported during the accounting period.
  2. Providing borrowers with a lump sum of cash upfront in exchange for specific borrowing terms.
  3. The financial worth of a laborer's experience and abilities.
  4. None of the above.

Answer: C) The financial worth of a laborer's experience and abilities

Explanation:

The Financial worth of a laborer's experience and abilities. Human resources incorporate resources like instruction, preparing, insight, abilities, wellbeing, and different things bosses worth like steadfastness and dependability.

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8. What is Short Term Market?

  1. Market in which securities are bought and sold.
  2. Strategies in the stock market or futures market in which the time duration between entry and exit is within a range of a few days to a few weeks.
  3. Market in which participants trade directly between two parties.
  4. An investment that is found on the asset side of a company's balance sheet.

Answer: B) Strategies in the stock market or futures market in which the time duration between entry and exit is within a range of a few days to a few weeks

Explanation:

Short Term Market alludes to those exchanging techniques securities exchange or fates market in which the time term among passage and exit is the inside scope of few days to few weeks.

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9. What is a Counter Market?

  1. Market in which participants trade directly between two parties.
  2. Strategies in the stock market or futures market in which the time duration between entry and exit is within a range of a few days to a few weeks.
  3. An investment that is found on the asset side of a company's balance sheet.
  4. A financial market in which long-term debt or equity-backed securities are bought and sold.

Answer: A) Market in which participants trade directly between two parties

Explanation:

An over-the-counter (OTC) market is a decentralized market where market members exchange stocks, items, monetary forms, or different instruments straightforwardly between two gatherings and without a focal trade or merchant.

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10. What is Export Credit Guarantee Corporation?

  1. A range of insurance covers Indian exporters against the risk of non – realization of export proceeds due to commercial or political risks.
  2. An export finance-based institution engaged in integrating foreign trade and investments with the national economic growth.
  3. A financial market in which long-term debt or equity-backed securities are bought and sold.
  4. None of the Above

Answer: A) A range of insurance covers Indian exporters against the risk of non – realization of export proceeds due to commercial or political risks

Explanation:

ECGC Ltd. (Previously known as Export Credit Guarantee Corporation of India Ltd.) completely claimed by the Government of India, was set up in 1957 with the goal of advancing commodities from the country by giving credit hazard protection and related administrations for sending out. Throughout the long term, it has planned diverse commodity credit hazard protection items to suit the prerequisites of Indian exporters. ECGC is basically a product advancement association, trying to work on the seriousness of the Indian commodities by giving them credit protection covers.

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11. What are Primary Markets?

  1. The amount the seller receives following the sale of an asset after all costs and expenses are deducted.
  2. The value of the assets of the Company or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
  3. Where investors buy and sell securities they already own.
  4. Market in which new Securities are issued by the Corporations to raise funds

Answer: D) Market in which new Securities are issued by the Corporations to raise funds

Explanation:

The primary market is the place where protections are made, while the optional market is the place where those protections are exchanged by financial backers. In the essential market, organizations offer new stocks and securities to the general population interestingly, for example, with the first sale of stock (IPO).

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12. What is a Secondary Market?

  1. The amount the seller receives following the sale of an asset after all costs and expenses are deducted.
  2. Where securities are traded by investors
  3. The value of the assets of the Company or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
  4. None of the above

Answer: B) Where securities are traded by investors

Explanation:

The secondary market is the place where financial backers trade protections they currently own. It is the thing that a great many people ordinarily consider as the "financial exchange," however stocks are likewise sold on the essential market when they are first given.

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13. What are Convertible Bonds?

  1. Fixed-income instruments, usually issued by high-rated companies in the form of a public issue to accumulate long-term capital appreciation.
  2. The financial security cannot be redeemed early by the issuer except with the payment of a penalty.
  3. Bonds can be redeemed or paid off by the issuer prior to the bonds' maturity date.
  4. A fixed-income corporate debt security that yields interest payments.

Answer: D) A fixed-income corporate debt security that yields interest payments

Explanation:

A convertible security is fixed-pay corporate obligation security that yields interest installments, yet can be changed over into a foreordained number of normal stock or value shares. The transformation from the cling to stock should be possible at specific occasions during the bond's life and is for the most part at the watchfulness of the bondholder.

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14. What are Non-Convertible Bonds?

  1. The financial security cannot be redeemed early by the issuer except with the payment of a penalty.
  2. Bonds can be redeemed or paid off by the issuer prior to the bonds' maturity date.
  3. Fixed-income instruments, usually issued by high-rated companies in the form of a public issue to accumulate long-term capital appreciation.
  4. The value of the assets of the Company or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

Answer: C) Fixed-income instruments, usually issued by high-rated companies in the form of a public issue to accumulate long-term capital appreciation

Explanation:

Non-convertible bonds fall under the obligation classification. They can't be changed over into value or stocks. NCDs have a decent development date and the interest can be paid alongside the chief sum either month to month, quarterly, or every year relying upon the proper residency indicated. They benefit financial backers with their preeminent returns, liquidity, okay, and tax cuts when contrasted with of convertible bonds.

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15. Which one is the least risky option?

  1. Bonds
  2. Shares
  3. Treasury Bills
  4. Trading

Answer: C) Treasury Bills

Explanation:

A Treasury Bill (T-Bill) is a transient U.S. government obligation commitment supported by the Treasury Department with a development of one year or less. Depository bills are normally sold in divisions of $1,000. Be that as it may, some can arrive at the greatest group of $5 million in non-cutthroat offers. These protections are generally viewed as okay and secure ventures.

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16. Which security holders will get unfulfilled obligations of the non-installment of profits by the Company during the misfortune?

  1. Convertible Preference Share Holder
  2. Ordinary Equity Holders
  3. Corporate Bonds
  4. Cumulative Preference Share Holders

Answer: D) Cumulative Preference Share Holders

Explanation:

Cumulative Preference shares are standard inclination imparts to one extra advantage. The additional benefit here is that the holders of these offers reserve the option to get profits regardless of whether the responsible organization has passed up paying them previously.

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17. The sum which is paid at the hour of development of the bond is equivalent to?

  1. Discount
  2. Corporate Bonds
  3. Face Value
  4. Yield

Answer: C) Face Value

Explanation:

A stock's assumed worth is the underlying expense of the stock, as shown on the declaration of the stock being referred to; a bond's presumptive worth is the dollar figure due to be paid to the financial backer when the bond arrives at development.

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18. In the primary market, the initial time given offers to be public, in financial exchange is considered as?

  1. Initial Public Offering
  2. Trade
  3. Share
  4. Issuance Offering

Answer: A) Initial Public Offering

Explanation:

The first sale of stock (IPO) alludes to the most common way of offering portions of a private organization to general society in another stock issuance. An IPO permits an organization to raise capital from public financial backers. The change from a private to a public organization can be a significant time for private financial backers to completely acknowledge gains from their venture as it regularly incorporates an offer premium for current private financial backers. In the meantime, it additionally permits public financial backers to take part in the contribution.

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19. The bonds that are supported with income from the project and are offered to back specific venture is classified as?

  1. Finance Bonds
  2. Revenue Bonds
  3. Trade
  4. Convertible Bonds

Answer: B) Revenue Bonds

Explanation:

Income security is a classification of metropolitan bonds upheld by the income from a particular task, for example, a cost extension, expressway, or nearby arena. Income bonds that finance pay creating projects are consequently gotten by a predefined income source.

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20. How many categories does Industrial Security Market have?

  1. 2
  2. 3
  3. 4
  4. 5

Answer: A) 2

Explanation:

The Industrial Security Market alludes to the market for offers and obligations of the current organizations, just as those of new organizations. This market is additionally separated into New Issue Market (NIM) and Old Issue Market. The New Issue Market is additionally called Primary Market. In like manner, the Old Issue Market is likewise called Secondary Market or Stock Exchange.

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