This quiz works best with JavaScript enabled. Home > Class 12 > Class 12 Business Studies Chapter 10 Financial Markets – Quiz 2 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Class 12 Business Studies Chapter 10 Financial Markets Quiz 2 (25 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. What does herd instinct cause people to do? A) Invest in a diversified portfolio. B) Follow the actions of others without their own analysis. C) Consult with a financial advisor before making any investments. D) Focus on long-term investments only. Show Answer Correct Answer: B) Follow the actions of others without their own analysis. 2. 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. 3. "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) 15%. B) 25%. C) 29%. D) 32%. Show Answer Correct Answer: A) 15%. 4. The book building method is used for: A) Currency trading. B) Bond issue. C) Price discovery in IPOs. D) Commodity trading. Show Answer Correct Answer: C) Price discovery in IPOs. 5. 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. 6. 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. 7. Which of the following are reported as liabilities on a bank's balance sheet? A) Reserves. B) Checkable deposits. C) Consumer loans. D) Deposits with other banks. Show Answer Correct Answer: B) Checkable deposits. 8. 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. 9. 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) 3.85%. C) 0.50%. D) 4.72%. Show Answer Correct Answer: B) 3.85%. 10. 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. 11. Which of the following is a capital market instrument? A) Treasury Bills. B) Equity Shares. C) Commercial Papers. D) Debentures. Show Answer Correct Answer: B) Equity Shares. 12. What is an ISIN? A) International Securities Identification Number. B) Intermediate Securities Identification Nomenclature. C) Internal Securities Identification Number. D) Indian Securities Identification Number. E) Not Attempted. Show Answer Correct Answer: A) International Securities Identification Number. 13. Which of the following best describes the capital market? A) Market for lending long-term funds. B) Market for speculative trading. C) Market for foreign currency trading. D) Market for short-term funds. Show Answer Correct Answer: A) Market for lending long-term funds. 14. 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. 15. 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. 16. A country shifting from barter to monetary exchange primarily gains: A) Higher inflation. B) More legal tender. C) Reduced transaction costs. D) Excess supply of money. Show Answer Correct Answer: C) Reduced transaction costs. 17. 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. 18. 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. 19. Which of the following is an example of a financial instrument traded in the capital market? A) Government bonds. B) Treasury bills. C) Certificate of deposit. D) Bank drafts. Show Answer Correct Answer: A) Government bonds. 20. Leasing is classified as which type of financial service? A) Fee-based service. B) Fund-based service. C) Consulting service. D) Consulting service. Show Answer Correct Answer: B) Fund-based service. 21. 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. 22. What is the primary reason municipal bonds are often considered safer investments compared to corporate bonds? A) Municipal bonds are backed by tax revenues. B) Municipal bonds have lower interest rates. C) Corporate bonds have higher default rates. D) Municipal bonds are only issued during economic downturns. Show Answer Correct Answer: A) Municipal bonds are backed by tax revenues. 23. 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. 24. 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. 25. 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. ← PreviousNext →Related QuizzesClass 12 Business Studies Chapter 10 Financial Markets Quiz 1Class 12 Business Studies Chapter 10 Financial Markets Quiz 3Class 12 Business Studies Chapter 10 Financial Markets Quiz 4Class 12 Business Studies Chapter 10 Financial Markets Quiz 5Class 12 Business Studies Chapter 10 Financial Markets Quiz 6Class 12 Business Studies Chapter 10 Financial Markets Quiz 7Class 12 Business Studies Chapter 10 Financial Markets Quiz 8Class 12 Business Studies Chapter 10 Financial Markets Quiz 9Class 12 Business Studies Chapter 10 Financial Markets Quiz 10Class 12 Business Studies Chapter 10 Financial Markets Quiz 11 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books