Banking Financial Awareness · Economics

Financial Markets and Instruments

1,985 Questions

Financial markets and instruments cover mutual funds, risk management, portfolio optimization, and investment strategies. These topics are critical for banking and financial awareness sections in competitive exams. Practice these questions to understand operational risk, asset valuation, and market regulations.

Portfolio optimizationOperational risk managementMutual funds valuationInvestment income typesHedging strategies

Financial Markets and Instruments Questions

Multiple choice commerce securities exchange board of india (sebi) objectives of sebi significance, functions of stock exchange, bse & nse stock exchanges functions of sebi sebi securities and exchange board of india (sebi)

A simple way to make a diversified investment is investing in _______.

  1. Stocks

  2. Shares

  3. Mutual Funds

  4. Derivatives
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A simple way to make a diversified investment in investing in mutual funds. Mutual fund is a collective investment that pools together the money of a large number of investors to purchase a number of securities, like stocks, bonds, etc. Investors can sell their mutual funds whenever they want.

Multiple choice commerce securities exchange board of india (sebi) objectives of sebi significance, functions of stock exchange, bse & nse stock exchanges functions of sebi sebi securities and exchange board of india (sebi)

______ is a collective investment that pools together the money of a large number of investors to purchase a number of securities like stocks, bonds etc.

  1. Mutual Fund

  2. Portfolio

  3. Shares

  4. Stock
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Mutual fund is a collective investment that pools together the money of a large number of investors to purchase a number of securities, like stocks, bonds, etc. Investors can sell their mutual funds whenever they want. A simple way to make a diversified investment in investing in mutual funds.

Multiple choice commerce securities exchange board of india (sebi) objectives of sebi significance, functions of stock exchange, bse & nse stock exchanges functions of sebi sebi securities and exchange board of india (sebi)

BSE also provides depository services through its _______ arm.

  1. Central Depository Services Ltd. (CDSL)

  2. National Securities Depository Limited (NSDL)

  3. NSE

  4. SEBI
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

BSE also provides depository services through its Cenrtral Depository Services Limited(CDSL) arm. CDSL helps to hold securities either in the certificated or uncertificated form. CDSL enabled book entry transfer of securities. CDSL can be defined as the second Indian securities depository.

Multiple choice commerce securities exchange board of india (sebi) objectives of sebi significance, functions of stock exchange, bse & nse stock exchanges functions of sebi sebi securities and exchange board of india (sebi)

The Securities and Exchange Board of India was established by the Government of India _____.

  1. as a cooperative society

  2. as a banking authority

  3. as an interim administrative body

  4. none of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The Securities and Exchange Board of India was established by the Government of India as an interim administrative body. SEBI is established in order to protect the interests of the investors and provide safety for investment. SEBI performs certain functions in order to promote and develop activities of stock exchange and increase the business in stock exchange. It also helps to regulate the business in stock exchange. It has framed certain rules and regulations to regulate the intermediaries.

Multiple choice organisation of commerce and management laws of returns - returns to a factor and returns to scale definition and functions of production department production or works department ideologies/concepts/views of marketing management

Which of the following is not an assumption in Miller and Modigliani approach?

  1. There are no corporate or personal income tax

  2. Investors are assumed to be rational and behave accordingly

  3. There is no corporate tax though there are personal income tax

  4. Capital markets are perfect
Reveal answer Fill a bubble to check yourself
D Correct answer
Multiple choice economics income-output determination public debt public debt main feature of tax

The expected rate of return from an additional unit of capital invested is termed as _____________.

  1. Marginal efficiency of capital (MEC)

  2. Marginal efficiency of investment (MEI)

  3. Both A & B

  4. Neither A nor B
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Marginal efficiency of capital (MEC) or Marginal efficiency of investment (MEI) refers to the expected rate of return from the allocation of a proportion of income or capital invested in the business. It is the rate of return which is expected as per the economic behavior of the business since past few years. 

Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

Which of the following is not a factor affecting financing decision?

  1. Cost

  2. Risk

  3. Investment

  4. Cash flow position of the business
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Factors affecting financing decision:-

(i) Cost
(ii) Cash flow position
(iii) Level of fixed operating cost
(iv) Control considerations
(v) Risk

Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

Financial Management is concerned with

  1. Investment decisions

  2. Financing decisions

  3. Dividend decisions

  4. All of above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
  1. Investment decisions includes investment in fixed assets (called as capital budgeting). Investment in current assets are also a part of investment decisions called as working capital decisions.
  2. Financial decisions - They relate to the raising of finance from various resources which will depend upon decision on type of source, period of financing, cost of financing and the returns thereby.
  3. Dividend decision - The finance manager has to take decision with regards to the net profit distribution. Net profits are generally divided into two:
  • Dividend for shareholders- Dividend and the rate of it has to be decided.
  • Retained profits- Amount of retained profits has to be finalized which will depend upon expansion and diversification plans of the enterprise.
Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

Financial leverage is also referred to as _____________.

  1. Gearing

  2. Trading on equity

  3. Fixed changes leverage

  4. All the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Financial leverage measures the extent to which a firm uses debt to finance its assets. It is synonymous with gearing and trading on equity, as all these terms describe the impact of fixed-cost financing on shareholder returns.

Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

The note on dividend policy develops an investment approach which involves ______ steps

  1. 3

  2. 4

  3. 5

  4. 6
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Standard financial literature on dividend policy frameworks typically outlines a 4-step approach involving analysis of earnings, determination of payout ratio, consideration of legal/tax constraints, and final board approval.

Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

The following are the managerial considerations influencing dividend policy
(1) Availability of cash
(2) Restrictions by the Financial Institutions
(3) Management Control
(4) Dividend policy as a financing decision
Of these

  1. 1 and 3 are correct

  2. 2 and 4 are correct

  3. 1, 2 and 4 are correct

  4. All are correct
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

All listed factors (availability of cash, restrictions by financial institutions, management control, and dividend policy as a financing decision) are critical managerial considerations when determining dividend payouts.

Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

Property dividends are distributed under ___________.

  1. normal conditions

  2. exceptional conditions

  3. Both (a) and (b)

  4. None of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Property dividends are rare and typically occur under exceptional circumstances, such as when a company needs to dispose of assets or lacks sufficient cash to pay a standard dividend.

Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

The dividend policy affects __________.

  1. the financial structure of corporation

  2. the flow of funds, corporate liquidity and stock prices

  3. the investor satisfaction with the return on his investment

  4. All the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Dividend policy is a multifaceted decision that impacts the firm's capital structure, its liquidity position, the market price of its stock, and the overall satisfaction of its investors.

Multiple choice functional area of management financial management nature and significance of management organisation of commerce and management business studies

Dividend policy is a ________.

  1. managerial decision

  2. financing decision

  3. dividend decision

  4. subjective value
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Dividend policy refers to the policy that deals with the percentage of profit which are yield as dividend to the shareholders of a company which is a financial decision as it includes the finance of the company which can be retained in the company or given as dividend.