CHAPTER 10- FINANCIAL MARKETS
Section A (1 Mark × 13 = 13 Marks)
1. Which of the following is not a function of the financial market?
a) Mobilisation of savings
b) Facilitating liquidity
c) Product packaging
d) Price discovery
2. The regulatory body of the securities market in India is __________.
3. What is the minimum investment amount in Treasury Bills?
4. Assertion (A): A commercial paper is an unsecured money market instrument.
Reason (R): It is issued by the Reserve Bank of India.
Options:
a) Both A and R are true, R is correct explanation
b) Both A and R are true, R is not the correct explanation
c) A is true, R is false
d) A is false, R is true
5. Name any two instruments of the money market.
6. Which of the following is traded in the secondary market?
a) IPO
b) Treasury Bill
c) Existing shares
d) Bonds issued by the government
7. What is meant by dematerialisation?
8. _________ is the process of issuing new securities to the public for the first time.
9. Which of the following is a capital market instrument?
a) Call Money
b) Commercial Paper
c) Debenture
d) Treasury Bill
10. What is the full form of SEBI?
11. What is the time horizon of money market instruments?
a) More than 5 years
b) Between 1 and 3 years
c) Less than 1 year
d) Exactly 1 year
12. What is the purpose of the Depository system?
13. Assertion (A): Stock exchanges create a ready market for securities.
Reason (R): They facilitate listing, buying, and selling of securities.
Options:
a) Both A and R are true, R is correct explanation
b) Both A and R are true, R is not the correct explanation
c) A is true, R is false
d) A is false, R is true
Section B (3 MARKS EACH)
14. Define a financial market. State any two of its functions.
15. Explain the meaning of the money market and briefly describe any two of its instruments.
16. Differentiate between the primary market and the secondary market (any three points).
17. Explain any four functions of the stock exchange.
18. What is the Depository System? Name any two depositories registered with SEBI in India.
Section C (4 MARKS)
19. Explain the nature and any four functions of the financial market.
20. What is the capital market? Briefly explain the two major components of the capital market.
21. Explain any five regulatory functions of SEBI in the Indian financial market.
22. Explain the process of dematerialisation. How does it help in the trading of securities?
23. Discuss the role and features of the National Stock Exchange (NSE).
24. “SEBI is the watchdog of Indian capital markets.” In light of this, explain the objectives and
protective functions of SEBI.
Section D ( 6 MARKS)
25. Sana is a finance manager at a leading FMCG company. She needs short-term funds for 3 months
and chooses to issue an unsecured instrument with high creditworthiness.
a) Identify the instrument being issued.
b) Mention two features of this instrument.
c) Name two other money market instruments Sana could consider.
26. Recently, a large listed company was penalized by SEBI for failing to disclose price-sensitive
information. SEBI directed the company to refund investors and barred it from raising funds
temporarily.
a) Name the regulatory body in focus.
b) State any two protective functions of this body.
c) How does SEBI safeguard investor interests?
27. Case Study: Stock Exchange Role
Rahul, a new investor, is advised to buy shares through a registered broker on NSE. He wants to know
how a stock exchange helps ensure safety and transparency.
a) Which type of market is NSE part of?
b) Mention three functions of stock exchange.
c) Why should investors prefer trading on stock exchanges?
28. Shreya’s grandfather gifted her 200 shares in physical form. She wanted to sell them but was told
that only electronic holdings can be sold now. She contacts a Depository Participant (DP) to help
convert them.
a) What process is being followed here?
b) Name two depositories in India.
c) Mention two advantages of holding shares in demat form.
29. An investor wants to invest for long-term gains and is considering whether to buy equity shares
or treasury bills.
a) Differentiate between money market and capital market (any two points).
b) Which investment option suits long-term goals? Why?
c) Name one instrument each from both markets.
30. A tech start-up plans to launch an IPO. SEBI issues guidelines on minimum disclosures, allotment
process, and timelines to protect investor interests and ensure transparency.
a) What is an IPO?
b) Name the market involved in an IPO.
c) State two regulatory measures SEBI might use in this case.
