Tag: capital market

Questions Related to capital market

_______ are issued at a price which is lower than their face value and repaid at par.

business organisation capital market money markets participants in money market types of markets

  1. Commercial Paper

  2. Certificate of Deposit

  3. Commercial Bill

  4. Treasury Bill

Show answer
Correct Option: D
Explanation:

Treasury bill are issued at a price which is lower than their face value and repaid at par. A treasury bill is basically an instrument of short-term borrowing by the Government of India maturing in less than one year.  Treasury bills enable government to get short term borrowings as these bills are sold to banks and general public. Maturity of Treasury bills varies from 14 to 364 days.

Which of the following is true regarding call rate?

business organisation capital market money markets participants in money market types of markets

  1. A rise in call money rates makes other sources of finance cheaper.

  2. There is an inverse relationship between call rates and other short-term money market instruments.

  3. It is a highly volatile rate that varies from day-to-day and sometimes even from hour-to-hour.

  4. All of the above

Show answer
Correct Option: D
Explanation:
Call rate can be defined as the rate paid on call money. It is very volatile rate which varies from day to day and sometimes from hour to hour. Following statements are true regarding call rate:
a) A rise in call money rates makes other sources of finance cheaper.
b) There is an inverse relationship between call rates and other short-term money market instruments.
c) It is a highly volatile rate that varies from day-to-day and sometimes even from hour-to-hour.

Treasury bills are also known as Zero Coupon Bonds that are available for a minimum of ______  and in multiples thereof.

business organisation capital market money markets participants in money market types of markets

  1. 20000

  2. 25000

  3. 30000

  4. 35000

Show answer
Correct Option: B
Explanation:

Treasury bills are also known as Zero Coupon Bonds that are available for a minimum of and in multiples thereof. A treasury bill is basically an instrument of short-term borrowing by the Government of India maturing in less than one year.  Treasury bills enable government to get short term borrowings as these bills are sold to banks and general public. Maturity of Treasury bills varies from 14 to 364 days.

Which one of the following is not a money market instrument?

business organisation capital market money markets participants in money market types of markets

  1. Commercial paper

  2. Participatory certificates

  3. Warrants

  4. Treasury Bills

Show answer
Correct Option: C

Short-term borrowing is undertaken in.

business organisation capital market money markets participants in money market types of markets

  1. Money market

  2. Capital market

  3. Stock market

  4. Commodity market

Show answer
Correct Option: A

In the call/notice money market, which of the following participants is allowed to trade?

business organisation capital market money markets participants in money market types of markets

  1. All Banks, Primary Dealers and Mutual Funds

  2. All Corporates

  3. Only Commercial Banks

  4. All of the above

Show answer
Correct Option: C

The expected rate of return of the money market is _________.

business organisation capital market money markets participants in money market types of markets

  1. Less

  2. More

  3. Zero

  4. Very High

Show answer
Correct Option: A
Explanation:

The money market yield will be lower than the yield on stocks and bonds because of the low risk.

A commercial bill is used to _____________.

business organisation capital market money markets participants in money market types of markets

  1. Pay the interest

  2. Meet the short term debt

  3. Finance the working capital requirements

  4. Meet the long term debt

Show answer
Correct Option: A,C
Explanation:

Working capital financing is done by various modes such as trade credit, cash and discount of bills, bank guarantee, letter of credit, factoring, commercial paper, working capital financing extensively used by all small and big businesses.

Only institutional investors can participate in __________.

business organisation capital market money markets participants in money market types of markets

  1. Foreign market

  2. Loan market

  3. Capital market

  4. Money market

Show answer
Correct Option: D
Explanation:

Only institutional investors can participate in money market. The money market consists of financial institutions and dealers in money or credit who wish to either borrow or lend. Participants borrow and lend for short periods, typically up to twelve months.

Money market deals in _____________________.

business organisation capital market money markets participants in money market types of markets

  1. Short term Securities

  2. Medium term securities

  3. Long term Securities

  4. None of these

Show answer
Correct Option: A
Explanation:

The money market is where financial instruments with high liquidity and very short maturities are traded. It is used by participants as a means for borrowing and lending in the short term, with maturities that usually range from overnight to just under a year.