This quiz works best with JavaScript enabled. Home > Cbse > Class 12 > Commerce > Business Studies > Class 12 Business Studies Chapter 10 Financial Markets – Quiz 1 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Class 12 Business Studies Chapter 10 Financial Markets Quiz 1 (60 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. What is the difference between the primary market and the secondary market? A) The primary market deals with new securities issuance, while the secondary market involves trading existing securities. B) The primary market is for stocks, while the secondary market is for bonds. C) The primary market and secondary market are the same. D) The primary market involves trading existing securities, while the secondary market deals with new securities issuance. Show Answer Correct Answer: A) The primary market deals with new securities issuance, while the secondary market involves trading existing securities. 2. What is the primary purpose of insurance? A) To provide financial protection against potential losses or risks. B) To offer discounts on various services. C) To guarantee profits in business ventures. D) To promote investment opportunities for clients. Show Answer Correct Answer: A) To provide financial protection against potential losses or risks. 3. International Monetary Fund (IMF) berperan dalam: A) Mengurangi pengangguran di negara berkembang. B) Memberikan pinjaman jangka panjang tanpa syarat. C) Menstabilkan sistem keuangan global dan memberikan bantuan keuangan jangka pendek. D) Membantu pembangunan jalan dan jembatan di pedesaan. Show Answer Correct Answer: C) Menstabilkan sistem keuangan global dan memberikan bantuan keuangan jangka pendek. 4. What are two of the best known stock indices? A) NASDAQ Composite and FTSE 100. B) S&P 500 and Dow Jones Industrial Average. C) Russell 2000 and Nikkei 225. D) DAX and Hang Seng Index. Show Answer Correct Answer: B) S&P 500 and Dow Jones Industrial Average. 5. The Ticker Window in the NEAT system is used to: A) Modify existing orders. B) Display the latest news related to stocks. C) Display market news. D) Display trade information for selected securities in real time. Show Answer Correct Answer: D) Display trade information for selected securities in real time. 6. If the investor perceives higher risk (more uncertainty with respect to the future payment), she would demand A) Lower risk premium. B) No risk premium. C) Higher risk premium. D) None of the above. Show Answer Correct Answer: C) Higher risk premium. 7. Which financial market is known for trading in short-term debt securities? A) Capital market. B) Derivatives market. C) Foreign exchange market. D) Money market. Show Answer Correct Answer: D) Money market. 8. Classify each item:stock exchange A) Financial institutions. B) Financial market. C) Financial instrument. D) None of the above. Show Answer Correct Answer: A) Financial institutions. 9. The instrument traded in securities market is A) Currency. B) Crude. C) Precious Metal. D) Stock. Show Answer Correct Answer: D) Stock. 10. The future value of a Rs.12, 000 investment made today, which gives an annual rate of return of 10% per annum, after one year should be ..... A) Rs. 12, 200. B) Not Attempted. C) Rs. 13, 200. D) Rs. 12, 500. E) Rs. 13, 100. Show Answer Correct Answer: C) Rs. 13, 200. 11. To maintain financial stability a central bank may have to provide emergency funds, though at a price, to protect depositors and in extreme cases to prevent a systemic crisis in the financial system.What the term used to describe this? A) Lender of penultimate resort. B) Lender of first resort. C) Lender of past resort. D) Lender of last resort. Show Answer Correct Answer: D) Lender of last resort. 12. At 6% annual inflation rate, an item costing Rs. 100 today, would cost Rs ..... after two years. A) Rs. 124.30. B) Not Attempted. C) Rs. 224. D) Rs. 122.46. E) Rs. 112.36. Show Answer Correct Answer: E) Rs. 112.36. 13. Which of the following are the instruments of money market? A) Call money. B) Certificate of deposits. C) Trade bills. D) All of the above. Show Answer Correct Answer: D) All of the above. 14. What is a financial market? A) A financial market is a government agency that regulates banks. B) A financial market is a type of insurance policy. C) A financial market is a place for buying groceries. D) A financial market is a marketplace for trading financial assets. Show Answer Correct Answer: D) A financial market is a marketplace for trading financial assets. 15. What is the term for a financial instrument that derives its value from an underlying asset, such as a stock or commodity? A) Bond. B) Certificate of deposit. C) Option. D) Mutual fund. Show Answer Correct Answer: C) Option. 16. A corporation acquires new funds only when its securities are sold in the A) Secondary market by a commercial bank. B) Primary market by a stock exchange broker. C) Secondary market by a securities dealer. D) Primary market by an investment bank. Show Answer Correct Answer: D) Primary market by an investment bank. 17. Secondary reserves include A) Deposits at Federal Reserve Banks. B) Deposits at other large banks. C) Short-term U.S. government securities. D) State and local government securities. Show Answer Correct Answer: C) Short-term U.S. government securities. 18. Funds raised through commercial paper used to meet the floatation cost is known as A) Paper financing. B) Bill of exchange. C) Commercial financing. D) Bridge financing. Show Answer Correct Answer: D) Bridge financing. 19. What is the impact of currency exchange in financial markets? A) Currency exchange only affects local businesses. B) Currency exchange affects trade balances, investment flows, and asset valuations in financial markets. C) Currency exchange has no impact on international relations. D) Currency exchange is solely determined by government policies. Show Answer Correct Answer: B) Currency exchange affects trade balances, investment flows, and asset valuations in financial markets. 20. Which is true about investments and risk? A) Every investment carries some degree of risk. B) NOT Every investment carries some degree of risk. C) All the above. D) None of the above. Show Answer Correct Answer: A) Every investment carries some degree of risk. 21. ..... is a bond that pays both interest and principle through periodic payments A) Floating rate bond. B) Zero Coupan Bond. C) Amortizing Bond. D) Step Up Bond. Show Answer Correct Answer: C) Amortizing Bond. 22. Which market deals with previously issued securities? A) Commodity market. B) Secondary market. C) Money market. D) Primary market. Show Answer Correct Answer: B) Secondary market. 23. What is a significant challenge posed by technological disruption in financial markets? A) Reduction in consumer demand. B) Adaptation to new fintech solutions. C) Need for traditional banking methods. D) Increased regulatory compliance. Show Answer Correct Answer: B) Adaptation to new fintech solutions. 24. Which of the following takes advantage of the internal trading? A) All shareholders. B) All Debentureholders. C) People having secret information of the company. D) All the employees. Show Answer Correct Answer: C) People having secret information of the company. 25. As a general statement, the forward exchange rate of two currencies is determined based on: A) The relevant interest rates of these two currencies now. B) The GDP growth of the countries of these two currencies. C) Market supply and demand of these two currencies. D) None of the above. Show Answer Correct Answer: A) The relevant interest rates of these two currencies now. 26. What does herd instinct cause people to do? A) Follow the actions of others without their own analysis. B) Consult with a financial advisor before making any investments. C) Invest in a diversified portfolio. D) Focus on long-term investments only. Show Answer Correct Answer: A) Follow the actions of others without their own analysis. 27. What can herd mentality in markets lead to? A) A more stable and predictable market. B) Unstable asset bubbles that ultimately pop. C) Guaranteed returns on investment. D) Lower risk of investment losses. Show Answer Correct Answer: B) Unstable asset bubbles that ultimately pop. 28. "Give me $ 1, 000 today and I'll double your money in five years, " offers the investment broker. To the nearest percent, what annual interest rate is being offered? A) 32%. B) 15%. C) 25%. D) 29%. Show Answer Correct Answer: B) 15%. 29. The book building method is used for: A) Bond issue. B) Commodity trading. C) Price discovery in IPOs. D) Currency trading. Show Answer Correct Answer: C) Price discovery in IPOs. 30. Stock prices are determined by A) The ruling of the Securities and Exchange Commission. B) Price fixing by workers at the stock exchanges. C) The valuation made by corporate auditors. D) The market forces of supply and demand. Show Answer Correct Answer: D) The market forces of supply and demand. 31. Asymmetric information can be divided into ..... A) Money market and capital market. B) Adverse selection and moral hazard. C) Economies of scale and economies of scope. D) None of the above. Show Answer Correct Answer: B) Adverse selection and moral hazard. 32. Which of the following are reported as liabilities on a bank's balance sheet? A) Checkable deposits. B) Deposits with other banks. C) Reserves. D) Consumer loans. Show Answer Correct Answer: A) Checkable deposits. 33. What function of money allows it to be used to fulfill financial commitments? A) Facilitating Exchange. B) Unit of Measurement. C) Store of Value. D) Standard for Debt Settlement. Show Answer Correct Answer: D) Standard for Debt Settlement. 34. I have purchased a one year discount Treasury bill at a price of 99.50 BGN. The T-bill matures within 47 days and the Government will repay me 100 BGN at maturity. What is the Yield on the investment i have made? A) 5.00%. B) 0.50%. C) 4.72%. D) 3.85%. Show Answer Correct Answer: D) 3.85%. 35. Which of the following is not a factor that affects the bid/ask spread? A) Order costs. B) Inventory costs. C) Volume. D) All of the above factors affect the bid/ask spread. Show Answer Correct Answer: D) All of the above factors affect the bid/ask spread. 36. Which of the following is a capital market instrument? A) Commercial Papers. B) Equity Shares. C) Debentures. D) Treasury Bills. Show Answer Correct Answer: B) Equity Shares. 37. What is an ISIN? A) International Securities Identification Number. B) Internal Securities Identification Number. C) Intermediate Securities Identification Nomenclature. D) Indian Securities Identification Number. E) Not Attempted. Show Answer Correct Answer: A) International Securities Identification Number. 38. Which of the following best describes the capital market? A) Market for lending long-term funds. B) Market for speculative trading. C) Market for short-term funds. D) Market for foreign currency trading. Show Answer Correct Answer: A) Market for lending long-term funds. 39. What is the purpose of a stock split? A) To increase the price of a stock. B) To reduce the number of outstanding shares. C) To make a stock more affordable to investors. D) To pay dividends to shareholders. Show Answer Correct Answer: C) To make a stock more affordable to investors. 40. The main difference between ETF and Mutual fund is: A) ETF is active while Mutual fund is a passive instrument. B) Mutual fund can be traded like a stock while ETF can't be traded. C) ETF is traded real time in exchanges while mutual fund is not. D) None of the above. Show Answer Correct Answer: C) ETF is traded real time in exchanges while mutual fund is not. 41. A country shifting from barter to monetary exchange primarily gains: A) Reduced transaction costs. B) Excess supply of money. C) Higher inflation. D) More legal tender. Show Answer Correct Answer: A) Reduced transaction costs. 42. The purpose of debit cards is? A) To allow you to buy goods with only the money in your account. B) To allow you to buy goods with the banks money. C) To let you buy things online. D) To buy goods and services. Show Answer Correct Answer: A) To allow you to buy goods with only the money in your account. 43. The market covers short-term debt instruments, usually issued by companies with high credit standing. They consist of a network of institutions and facilities for trading debt securities with a maturity of one year or less A) Primary market. B) Secondary market. C) Money market. D) None of the above. Show Answer Correct Answer: C) Money market. 44. Which of the following is an example of a financial instrument traded in the capital market? A) Certificate of deposit. B) Bank drafts. C) Government bonds. D) Treasury bills. Show Answer Correct Answer: C) Government bonds. 45. Leasing is classified as which type of financial service? A) Fee-based service. B) Consulting service. C) Fund-based service. D) Consulting service. Show Answer Correct Answer: C) Fund-based service. 46. Warren Buffett's first rule of investing, "Never Lose Money" sounds obvious, but you should be gaining an understanding of what he really meant. What was he getting at? A) Purchase many speculative investments one will surely work. B) Educate yourself on the companies you purchase, including measures like book value. C) Keep your assets in a savings account, it has a very low risk and is FDIC insured. D) Own depreciating assets. Show Answer Correct Answer: B) Educate yourself on the companies you purchase, including measures like book value. 47. What is the primary reason municipal bonds are often considered safer investments compared to corporate bonds? A) Municipal bonds are only issued during economic downturns. B) Municipal bonds are backed by tax revenues. C) Corporate bonds have higher default rates. D) Municipal bonds have lower interest rates. Show Answer Correct Answer: B) Municipal bonds are backed by tax revenues. 48. Which of the following are transaction deposits? A) Savings accounts. B) Small-denomination time deposits. C) Checkable deposits. D) Certificates of deposit. Show Answer Correct Answer: C) Checkable deposits. 49. What is the purpose of credit cards? A) To let you buy goods whether you have the money or not. B) To only let you buy goods/services if you have the money. C) To give you discounts on goods/services. D) To allow you to borrow money from the bank. Show Answer Correct Answer: A) To let you buy goods whether you have the money or not. 50. Why is liquidity important in financial markets? A) Liquidity is only important for long-term investments. B) Liquidity increases the risk of asset depreciation. C) Liquidity allows for quick buying and selling of assets without significant price impact. D) Liquidity guarantees profit on every transaction. Show Answer Correct Answer: C) Liquidity allows for quick buying and selling of assets without significant price impact. 51. What are the key marketing elements to launch a new financial service? A) Market trends, customer feedback, advertising budget, social media presence, competitor analysis, sales tactics. B) Target audience, value proposition, marketing strategy, digital channels, compliance, partnerships. C) All the above. D) None of the above. Show Answer Correct Answer: B) Target audience, value proposition, marketing strategy, digital channels, compliance, partnerships. 52. What is the purpose of attaching covenants to a security? A) To reduce inflation. B) To increase stock value. C) To stabilize currency. D) To impact the interest rate. Show Answer Correct Answer: D) To impact the interest rate. 53. SEBI was established in which year? A) 1995. B) 1988 (statutory in 1992). C) 1991. D) 1988 (statutory in 1992). Show Answer Correct Answer: B) 1988 (statutory in 1992). 54. Primary market is also called as A) Secondary market. B) Money market. C) Indirect Market. D) New Issue Market. Show Answer Correct Answer: D) New Issue Market. 55. Which of the following is an asset on a retail bank's balance sheet? A) Share Capital. B) Long Term Borrowing. C) Retained profit. D) Advances. Show Answer Correct Answer: D) Advances. 56. It refers to a public markets that exist for issuing, buying, and selling stocks that trade on a stock exchange or over-the-counter. A) Stock Markets. B) Public Markets. C) Market. D) Trade Market. Show Answer Correct Answer: A) Stock Markets. 57. The money return a stockholder receives on the amount invested in a company is a A) Risk. B) Bond. C) Capital loss. D) Dividend. Show Answer Correct Answer: D) Dividend. 58. The Reserve Bank of India (RBI) is the regulator for the capital market. A) True. B) False. C) All the above. D) None of the above. Show Answer Correct Answer: B) False. 59. In the context of bonds, what does the term "coupon rate" refer to? A) The rate at which the bond's price fluctuates. B) The rate at which bonds are bought back by the issuer. C) The rate at which new bonds are issued. D) The interest rate that the bond issuer will pay to the bondholder. Show Answer Correct Answer: D) The interest rate that the bond issuer will pay to the bondholder. 60. The DOW Jones Industrial Average is an index of 30 American companies. Why is the DOW Jones Industrial Average important? A) It tells Americans how much debt the country is in. B) It helps economists predict when a stock market crash will happen. C) It tells Americans how many jobs are out there. D) It provides a snapshot of how the stock market and the US economy is doing. Show Answer Correct Answer: D) It provides a snapshot of how the stock market and the US economy is doing. 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