Chapter 2:

Introduction to
securities market

Treasury Bills issued by the 1/1

Banks

Government

Insurance Companies

All of the above

Feedback

Treasury Bills are issued by the government as short-term instruments to raise funds.

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 Quiz for Chapter 2: Introduction to securities market

A close-ended mutual fund scheme allows investors to purchase units 1/1

from the fund and subsequently sell those units back to the fund at any
time.

False

True

Feedback

Close-ended mutual fund schemes have a fixed maturity and usually don't allow investors to
buy or sell units directly to the fund after the initial offer period. Instead, units are traded on
secondary markets among investors.

When a large number of shares are offered to a specific set of individuals, 1/1
it is known as

Equity Shares

Private Placement

Private Equity

None of the Above

Feedback

Private Placement refers to the sale of securities directly to a select group of investors
rather than through a public offering.

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 Quiz for Chapter 2: Introduction to securities market

The major uses of indices are 1/1

The performance of the economy is indicated by the index

Indices indicate real-time market sentiments

Indices act as an underlying for the Index

All of the above.

Feedback

All of the above are the uses of indices.

While raising capital, If capital is raised from investors outside the country 1/1
is called

Offshore offering

Onshore offering

Feedback

Offshore offering refers to raising capital from investors located outside the country where
the issuing entity operates.

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 Quiz for Chapter 2: Introduction to securities market

What is the process of converting securities held in physical form into 1/1
electronic form?

Dematerialization

None of the Above

Rematerialization

Book Keeping

Feedback

Dematerialization is the process of converting physical securities, such as share

certificates or bonds, into electronic or digital form

When a trader buys an asset at a lower price in one market and sells it at a 1/1
higher price in another market to exploit the price difference, it is known as:

Trading

Hedging

Speculation

Arbitrage

Feedback

Arbitrage refers to the practice of buying an asset or security at a lower price in one
market and simultaneously selling it at a higher price in another market to profit from the
difference in prices

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 Quiz for Chapter 2: Introduction to securities market

A pledge is an act of taking a loan against securities by the investor. Then 1/1
the entity that is giving the loan against the securities is called as

Pledge

Pledgor

Feedback

When an investor offers securities as collateral to secure a loan, the party providing the
loan against those securities is known as the "pledgee.”

An agreement between two parties to exchange future cash flows based 1/1
on a predetermined formula is known as:

Options

Contracts

Swaps

None of the Above

Feedback

Swaps are financial agreements between two parties to exchange future cash nows
according to a predetermined formula. These agreements involve the exchange of
financial instruments or cash nows, such as interest rates, currencies, or other variables,
typically over a specified period

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 Quiz for Chapter 2: Introduction to securities market

Which option gives the buyer the right, but not the obligation, to sell a given 1/1
quantity of the underlying asset at a given price on or before a given date?

Call Option

Put Option

Forward Contract

Future Contract

Feedback

A put option is a financial contract that grants the buyer the right, but not the obligation, to
sell a specified quantity of the underlying asset at a predetermined price (also known as the
strike price) on or before the expiration date of the option.

Debt instruments issued by institutions against financial assets such as 1/1

home loans, auto loans, rent receivable, credit card receivables, etc. known
as

Currency-linked Debentures

Mortgage Backed Securities

Equity Linked Debentures

Commodity Linked Debentures

Feedback

Mortgage-backed Securities (MBS) are debt instruments issued by institutions. They're

backed by assets like home loans, auto loans, or credit card receivables. Investors receive
payments based on the interest and principal from the underlying loans.

@Infinite_Trading_Hub 6/19
 Quiz for Chapter 2: Introduction to securities market

What is an entity established or incorporated outside India that proposes to1/1

make investments in India?

Mutual Funds

Domestic Portfolio Investors

Foreign Portfolio Investor

Insurance Companies

Feedback

A Foreign Portfolio Investor (FPI) refers to an entity established or incorporated outside

India that aims to invest in the Indian financial markets.

Which of the following statements accurately describes Global Depositary 1/1

Receipts (GDRs)?

GDRs are not related to international trading.

GDRs are depositary receipts that can be traded in various countries.

GDRs are depositary receipts limited to trading in a single country.

GDRs are exclusively used by domestic investors.

Feedback

GDRs are certificates representing shares in a foreign company. They are issued by
international banks outside the company's home country.

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 Quiz for Chapter 2: Introduction to securities market

Which agency acts as a legal counterparty to all trades and guarantees 1/1
settlement of all transactions on the Stock Exchanges?

Clearing Corporation

Clearing banks

Merchant Bankers

All of the above

Feedback

A Clearing Corporation serves as a central counterparty in financial markets, guaranteeing

the settlement of all trades executed on stock exchanges. It ensures the smooth and
eficient functioning of the market by acting as an intermediary between buyers and sellers.

TOM Trades are settled on 1/1

T+2 day

Previous day

T+1 day

Same day

Feedback

In TOM trades, settlement occurs on the day after the trading day (T+1), which means
there is a one-day gap between the trade and the settlement.

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 Quiz for Chapter 2: Introduction to securities market

Treasury bills, commercial papers, and certificates of deposits are long- 1/1
term debt instruments. True or False?

False

True

Feedback

Treasury bills, commercial papers, and certificates of deposits are short-term debt
instruments issued for a period not exceeding one year.

1/1
market facilitates buying and selling for the investors.

Primary

Neither Primary or Secondary

Primary & Secondary

Secondary

Feedback

In the secondary market, investors trade previously issued securities such as stocks,
bonds, or derivatives among themselves, allowing buying and selling without the
involvement of the original issuing company.

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 Quiz for Chapter 2: Introduction to securities market

How are exchange-traded funds comparable to other investment choices 1/1

available to investors?

Index funds

Bonds

Active Mutual Funds

Debt Funds

Feedback

ETFs and index funds share similarities as they both aim to replicate the performance of a
specific market index. They are passively managed investment options that offer
diversification to investors.

Net asset value is the per-unit market value of all the securities held by a 1/1
mutual fund scheme. True or False?

True

False

Feedback

Mutual funds collect money from investors and then invest it on their behalf in the securities
market. The net asset value (NAV) represents the per-unit market value of all the securities
held within a mutual fund scheme.

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 Quiz for Chapter 2: Introduction to securities market

What statements accurately describe Swap contracts? 1/1

The notional amount, on which interest is calculated, is mutually agreed upon by

the counterparties.

Involves an agreement between two parties to exchange future cash flows based
on a predetermined formula: one pays a fixed rate and receives a floating rate.

Exchange of interest rates on the agreed notional amount occurs at settlement

dates (e.g., quarterly) between the parties.

All of the above statements are correct.

Feedback

All the options accurately describe the characteristics of a swap.

In the right issue shares are offered to existing shareholders at a price 1/1
current market price.

Above

Equal

Below

Any of the option

Feedback

In a rights issue, shares are typically offered to existing shareholders at a price that is
below the current market price. This is done to incentivize current shareholders to
participate in the issuance by offering them the opportunity to buy additional shares at a
discounted rate compared to the prevailing market price.

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 Quiz for Chapter 2: Introduction to securities market

How are exchange-traded funds comparable to other investment choices 1/1

available to investors?

Index funds

Bonds

Active Mutual Funds

Debt Funds

Feedback

ETFs and index funds share similarities as they both aim to replicate the performance of a
specific market index. They are passively managed investment options that offer
diversification to investors.

Depository Receipts are another form of financial instrument that 1/1

represents of a local company and is traded on a stock
exchange of its home country.

Bonds, Inside

Convertible, Inside

Debenture,

Outside Shares,

Outside

Feedback

Depository Receipts represent shares of a foreign company and are traded on a stock
exchange outside the country of its origin. They allow investors to hold shares of foreign
companies in the form of certificates traded on their local stock exchanges, making it
easier to invest in companies from other countries.

@Infinite_Trading_Hub 12/19
 Quiz for Chapter 2: Introduction to securities market

Which of the following statements is false? 1/1

Forwards have no default risk while futures face the risk of counterparties
defaulting

Forwards are agreements to sell an asset at a future date

Futures are Exchange-traded contracts

Forwards are over-the-counter contracts

Feedback

A forward contract is a private agreement between a buyer and a seller to exchange an

asset at an agreed price, quantity, and time. They're known as OTC agreements without
involvement from clearing houses. Forwards involve selling an asset in the future, while
futures have no default risk, unlike forwards which carry counterparty default risk in the
absence of a clearing house.

Which mutual fund scheme does not have any fixed maturity and can be 1/1
bought and sold at any time?

Open-ended

Close-ended

Interval

None of the above

Feedback

The type of mutual fund scheme that does not have a fixed maturity and can be bought or
sold at any time is known as an "Open-Ended Mutual Fund." These funds do not have a
specific maturity date, and investors can enter or exit them at their convenience, as they
continuously issue and redeem units based on investor demand.

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 Quiz for Chapter 2: Introduction to securities market

Bonds issued India and denominated in are known as Masala 1/1

bonds.

Outside; INR

Inside; USD

Outside;

USD Inside;

INR

Feedback

Masala bonds are issued by Indian entities outside of India but are in Indian Rupees (INR).
They allow Indian issuers to raise funds internationally while being denominated in their
home currency.

Securities market provides a platform to mutually satisfy goals 1/1

of and

Borrowers, Seekers of funds

Government, Issuers

Issuers, Investors

Liquidity, Raising capital X

Feedback

The securities market serves both issuers and investors by offering a platform. It allows
investors to select from various available instruments and enables issuers to raise capital
without being restricted to specific customers or locking them in.

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 Quiz for Chapter 2: Introduction to securities market

Depository receipts have the underlying of the shares of the issuer 0/1
company. True or False?

True

False

Correct answer

True

Feedback

Depository receipts are backed by a specific quantity of underlying company shares.

Shareholders who offer their shares at an agreed price for conversion into depository
receipts are known as sponsors of the issue.

The payment of interest and repayment of principal on FCCBs is in foreign 1/1

currency.

True

False

Feedback

FCCBs involve payments of interest and repayment of principal in a foreign currency,

which is a key characteristic of these bonds.

@Infinite_Trading_Hub 15/19
 Quiz for Chapter 2: Introduction to securities market

As compared to non-convertible bonds, the yield on the convertible bond 1/1

is

Relatively Higher

Relatively Lower

Feedback

Convertible bonds usually have a lower yield compared to non-convertible bonds because
they offer investors the option to convert the bonds into equity shares. Investors accept a
lower yield in exchange for potential gains from converting the bond into stocks later on.

What features does convertible debenture have? 1/1

Debt, Price of the equity X

Income, Repayment

Debt, Confirmed Interest payment

Debt, Equity

Feedback

Convertible debentures possess a hybrid nature, combining characteristics of both debt

and equity. They function initially as debt instruments, providing regular interest payments to
investors. However, they also grant the option to convert these debentures into equity
shares of the issuing company at a predetermined price during a specified period

@Infinite_Trading_Hub 16/19
 Quiz for Chapter 2: Introduction to securities market

As per SCRA, the term securities include which of the following? 1/1

Government Securities

Derivatives

Shares, scrips, or bonds

All of the above

Feedback

As per SCRA, the term securities include Government Securities, Derivatives,

Shares, Bonds, Certificates, Scrips, Debentures etc.

Along with SEBI and other regulators under the Companies Act, RBI also 1/1
regulates the Equity Shares Market. State whether True or False.

True

False

Feedback

The statement is false. The Reserve Bank of India (RBI) primarily regulates and supervises
banks and financial institutions in India.

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