CAPITAL MARKET Multiple Choice Questions and Answers

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CAPITAL MARKET Multiple Choice Questions :-

1. If a client buys shares worth Rs. 1,00,000 and sells shares worth Rs. 1,00,000 through a stock-broker,
then the maximum brokerage payable is _______.

A. Rs. 4,000

B. Rs. 5,000

C. Rs. 2,000

D. Rs. 6,000

ANS:- B

2. Two sell orders enter into the system and are unmatched : 1) 200 shares @ Rs. 72.75 at time 10:30
a.m. 2) 300 shares @ Rs. 72.70 at time 10:31 a.m. Which order will get a priority for getting executed.

A. Order no. 1.

B. Order no. 2

C. both will have equal priority

D. None

ANS:- B

3. The Trading Members shall keep the dematerialized securities of Constituents in a separate
beneficiary account distinct from the beneficiary account maintained for holding their own
dematerialized securities. True or False?

A. True
B. False

ANS:- A

4. If a client buys shares worth Rs. 5,25,000 and sells shares worth Rs. 4,75,000 through a broker, then
the maximum brokerage payable to broker is ___.

A. Rs. 25,000

B. Rs. 15,000

C. Rs. 10,000

D. Rs. 20,000

ANS:- A

5. On Line Backup is a facility that the user can invoke to take a backup of all order and trade related
information for the user. True or False.

A. True

B. False

ANS:- A

6. Mr. Shah has decided to deposit Rs. 300,000 in the bank annually. If the bank has a policy of
continuous compounding and the prevailing interest rate is 12% how much would his deposit grow upto
in 3 years?

A. 1,234,146.15

B. 1,113,502.54

C. 1,085,123.70

D. 1,083,467.63
ANS:- D

7. What does ‘AUI’ indicate as a message code in ‘Full Message window’ in the NEAT system?

A. Auction Initiation Messages

B. Auction User Interface messages

C. All messages related to user interface

D. All messages related to Auctions

ANS:- A

8. Institutional transactions are identified by the use of the ________ at the time of order entry.

A. user code

B. user id

C. participant code

D. client id

ANS:- C

9. The NSCCL interposes itself as a central counterparty between the counterparties to trades and nets
the positions so that a member has security wise net obligation to receive or deliver a security and has
to either pay or receive funds. True or False?

A. True

B. False

ANS:- A
10. A user can simultaneously view a regular inquiry (e.g. MBP) and the Snap Quote display on the
trading screen. True or False?

A. True

B. False

ANS:- A

11. What does ‘OM’ indicate as an activity in the ‘Activity Log’ screen in the NEAT system?

A. Order Matched

B. Order Cancelled

C. Trade Modified

D. Order Modified

ANS:- D

12. The clients introduced by an authorized person to a trading member, would be required to deliver
securities and make payments directly in the trade name of the trading member. True or False?

A. True

B. False

ANS:- A

13. At the end of the trade cycle, the trades are _______ to determine the obligations of the trading
members to deliver securities/funds as per settlement schedule.

A. grossed

B. aggregated
C. netted

D. offset

ANS:- C

14. ______ is a volume related order condition.

A. An order with a limit price condition only

B. An order with a stop loss only

C. An order with a Disclosed Quantity (DQ)

D. None of the above

ANS:- C

15. 100 share of Reliance Ltd. are purchased on Monday. Provided there are no holidays in between,
settlement should take place on ______ ?

A. Wednesday (T+2)

B. Tuesday (T+1)

C. Thursday (T+3)

D. Friday (T+4)

ANS:- A

16. A trading member on the NSE, has a branch order value of Rs. 950 lakh for his Mumbai branch and
Rs. 600 lakh for Delhi branch. Mumbai branch has two users ‘X’ and ‘Y’ with user order value limits of Rs.
300 lakh and Rs. 400 lakh respectively. Delhi branch has one user ‘Z’ with user order value limit of Rs.
550 lakh. The member applies for a new user at Mumbai. What is the maximum user order value that
can be set for the new user?
A. Rs. 100 lakh

B. Any amount, as there is no restriction on User Order Value

C. Rs. 250 lakh

D. Rs. 150 lakh

ANS:- C

17. A trading member on the NSE, has set the branch order value unlimited for his Chennai branch and
Rs. 800 lakh for Kolkata branch. Chennai branch has two users ‘X’ and ‘Y’ with user order limits of Rs.
550 lakh and Rs. 500 lakh respectively. Kolkata branch has one user ‘Z’ with user order value limit of Rs.
550 lakh. The member applies for a new user at Kolkata. What is the maximum user order value that can
be set for the new user?

A. Not more than Rs. 950 lakh

B. Zero

C. unlimited

D. Rs. 250 lakh

ANS:- D

18. In case the security has not been traded on a particular day, ________ at the NSE is to be considered
as the closing price.?

A. the average closing price for the last one week

B. the theoretical closing price

C. the latest available closing price

D. none of the above

ANS:- C
19. Mr. Desai has decided to deposit Rs. 200,000 in the bank annually. If the bank has a policy of
continuous compounding and the prevailing interest rate is 8% how much would his deposit grow upto
in 2 years?

A. 434,141.15

B. 413,502.54

C. 485,123.70

D. 433,820.81

ANS:- D

20. One of the Custodial Trade Reports is the ___________

A. Client Obligation Report

B. Custodial Trade Pending Confirmation

C. Clearing Member Report

D. none of the above

ANS:- B

21. No payment for transaction in which a Trading Member is taking position as a principal will be
allowed to be made from the client’s account?

A. True, unless his clients approves the payment

B. True

C. True, only if his clients are making payments on time

D. False

ANS:- B
22. Statement 1 : An active buy order matches with the best passive sell order if the price of the passive
sell order is less than or equal to the price of the active buy order. Statement 2 : An passive buy order
matches with the best active sell order if the price of the passive buy order is less than or equal to the
price of the active sell order. Which of the above statements is True?

A. Statement 2

B. Statement 1

C. Both Statement are true

D. Both Statement are False

ANS:- B

23. NSCCL becomes the legal counterparty to the net settlement obligations of every member. This
principle is called ______.

A. ‘notation’

B. ‘settlement fulfillment’

C. ‘novation

D. ‘obligation guarantee’

ANS:- C

24. The Message Window in the NEAT system allows a user to view messages broadcast by the Exchange
such as, __________

A. corporate actions

B. market news

C. auctions related information

D. All of the above

ANS:- D

25. ______ can be traded in the Limited Physical Market?

A. Illiquid shares

B. Futures and Options

C. Odd lots

D. Government Securities

ANS:- C

26. For liquid securities, the VaR margins are based on the ________ of the Security.

A. volatility

B. returns

C. liquidity

D. exposure limit

ANS:- A

27. Upfront margin rates applicable for all securities in Trade for Trade – segment (TT) is ______.

A. 50%

B. 100%

C. 200%

D. 150%

ANS:- B
28. The stamp duty on transfer of demat securities has been waived. True or False?

A. True

B. False

ANS:- A

29. In NSCCL, a _______ is a clearing member but not a trading member.

A. self clearing member

B. participant

C. broker

D. custodian

ANS:- D

30. Securities and funds pay out takes place on ______ working days after the trade date

A. ‘T+3’

B. ‘T+2’

C. ‘T+1’

D. within 24 hours of sale

ANS:- C

31. Security sigma means the _______ of the security computed as at the end of the previous trading
day.
A. mean

B. volatility

C. impact cost

D. none of the above

ANS:- B

32. The branch manager receives End of Day reports for _________.

A. his own orders only

B. all dealers under the trading member

C. all the dealers under that branch

D. any authorized user

ANS:- C

33. The pre-set Market price protection percentage is by default set to _____ of the LTP

A. 10%

B. 2%

C. 3%

D. 5%

ANS:- D

34. Auction is held in PQR for 10,000 shares. The closing price of PQR on that day was Rs.259.00 The last
traded price of PQR on that day was Rs.254.0 The close price of PQR last Friday was Rs.255.00 The
previous day’s close price of PQR was Rs.264.00 What is the maximum allowable price at which the
member can put a sell order in the auction for PQR? (Assume Price Band applicable for Auction market is
+/ – 20% )
A. Rs. 316.80

B. Rs. 390.65

C. Rs. 364

D. Rs. 394

ANS:- A

35. Securities Delivered Statement: This statement provides information on ______?

A. delivering centre

B. total number of shares to deliver for each security

C. quantity delivered and quantity of shares delivered short

D. all of the above

ANS:- D

36. The orders with ______ attribute disclose only a part of the total order quantity to the market.

A. Immediate or Cancel (IOC)

B. Stop Loss (SL)

C. Disclosed Quantity (DQ)

D. none of the above

ANS:- C

37. Security wise User Order Quantity Limit (SUOQL) can be modified anytime during trading hours. True
or False?
A. True

B. False

ANS:- A

38. Auction Square Up Debit Statement: This report gives details of unauctioned deliveries that are
squared-up by the Exchange. True or False?

A. True

B. False

ANS:- A

39. Surveillance and Control (SURCON) is that period after market close during which, the users have
_______ only.

A. order entry access

B. trade cancellation access

C. trade modification access

D. inquiry access

ANS:- C

40. The stop loss orders are prioritized in the stop loss book with the __________________

A. most likely order to trigger first and the least likely to trigger last.

B. least likely order to trigger first and the most likely to trigger last.

C. time-price priority algorithm

D. none of the above

ANS:- A

41. What does ‘P’ indicate as a status in the ‘Auction Inquiry’ screen in the NEAT system?

A. Auction is pending and yet to begin

B. Auction is deleted.

C. There is no such status indicator as ‘P’ in the Auction Inquiry screen.

D. Auction is over.

ANS:- A

42. ___________ assumes the counter party risk of each member and guarantees financial settlement.

A. SEBI

B. Central Depository Services Ltd. (CDSL)

C. The National Depository Services Ltd. (NSDL)

D. The National Securities Clearing Corporation Ltd. (NSCCL)

ANS:- D

43. No person shall be admitted as trading member of a recognized stock exchange if he has been
adjudged bankrupt or a receiver order in bankruptcy has been made against him or he has been proved
to be insolvent even though he has obtained his final discharge. True or False?

A. True

B. False

ANS:- A
44. Rahul is supposed to receive Rs. 1,00,000 from Chandra after 3 years. If the interest rate is 8%, what
is the present value of the amount due from Chandra?

A. 71,686.34

B. 79,383.22

C. 81,232.25

D. 91,444.9

ANS:- B

45. When the user invokes the order entry screen, the field(s) that are (is) taken as default are (is)
__________.

A. Symbol

B. Series

C. Book Type

D. All of the above

ANS:- D

46. A stock-broker shall not encourage sales or purchases of securities with the sole object of generating
brokerage or commission. Is the above statement True or False, under the Code of Conduct Guidelines
prescribed under SEBI (Stock Brokers & Sub-brokers) Regulations, 1992.

A. True

B. False

ANS:- A
47. Where a recognized stock exchange acting in pursuance of any power given to it by its bye-laws,
refuses to list the securities of any company, the company shall be entitled to be furnished with reasons
for such refusal and the company may appeal to the _________ against such refusal.

A. SEBI

B. recognized stock exchange

C. Securities Appellate Tribunal (SAT)

D. High Court

ANS:- C

48. Fixed Deposit Receipts (FDRs) issued by approved banks can be submitted as a(n) ___________ to
NSCCL by trading members.

A. surety.

B. indemnity

C. warranty

D. additional base capital

ANS:- D

49. NSE has implemented ______________ in compulsory rolling settlement with effect from July 02,
2001 .

A. securities-based market-wide circuit breakers

B. index-based market-wide circuit breakers

C. market-wide based securities-wise circuit breakers

D. none of the above

ANS:- B
50. Which of the following do not issue securities in the primary market?

A. FIIs

B. State Governments

C. Companies

D. None of the above

ANS:- A

51. A trading member shall be deemed guilty of un-businesslike conduct for any of the following or
similar acts or omissions namely:

A. if it transacts its own business or the business of its constituent in fictitious names

B. If it makes a fictitious transaction

C. circulates or causes to be circulated, any rumors;

D. all of the above

ANS:- D

52. A trading member shall be deemed guilty of misconduct if he fails to _______

A. submit its audited accounts to the Exchange

B. pay its subscription, fees, arbitration charges or any other money which may be due to the exchange

C. to submit or makes any false or misleading statement in its clearing forms

D. All of the above

ANS:- D
53. Penalties are charged to members for _____________

A. failure to fulfil their funds obligations

B. failure to fulfil their securities deliverable obligations

C. Margin Shortages

D. all of the above

ANS:- D

54. The trading members can participate in the Exchange initiated auctions by entering orders as a
______.

A. participant

B. initiator

C. solicitor

D. none of the above

ANS:- C

55. The following facility allows the user to have a drop down list of client codes at the account field:

A. Client List Master

B. Client Database Master

C. Client Code Master

D. Client Master Maintenance

ANS:- D
56. One of the requirements for admission to membership on the NSE is to pass an on-line examination
under NSE’s Certification in Financial Markets (NCFM).

A. True

B. False

ANS:- A

57. Two buy orders enter into the system and are unmatched : 1) 200 shares @ Rs. 72.75 at time 10:30
a.m. 2) 300 shares @ Rs. 72.80 at time 10:31 a.m. Which order will get a priority for getting executed.

A. Order no. 1.

B. Order no. 2

C. both will have equal priority

D. None

ANS:- B

58. Two buy orders enter into the system and are unmatched : 1) 200 shares @ Rs. 72.75 at time 10:30
a.m. 2) 300 shares @ Rs. 72.75 at time 10:31 a.m. Which order will get a priority for getting executed.

A. Order no. 1.

B. Order no. 2

C. both will have equal priority

D. none

ANS:- A

59. An advertisement released by a trading member can contain a recommendation regarding purchase
or sale of any particular share or security of any company. True or False?
A. True

B. False

ANS:- B

60) A preliminary prospectus is known as a

A. golden parachute.

B. red herring.

C. blue sky.

D. green shoe.

ANS:- B

61. Letter stock is

A. a handwritten certificate representing a corporate IOU.

B. a mass mailing offering a security for sale.

C. securities issued by the United States Postal Service.

D. privately placed common stock that cannot be immediately resold to the general public.

ANS:- D

62. Which of the following is not a rating agency.

A)FITCH

B)ICRA

C)CRISIL

D)FTSE

ANS:- D
63. What is Red Herring in an IPO?

A) Prospectus

B) Submission of Form

C) Funds Generated during IPO

D) Minimum Offer per share

ANS:- A

65. Largest Indian Private Sector Company in terms of Market Cap?

A) ICICI Bank

B) Bharti Airtel

C) TCS

D) Reliance Industries

ANS:- D

66. Which of the below bank is not a part of Nifty?

A) Axis Bank

B) IDBI Bank

C) PNB

D) Kotak Mahindra

ANS:- B

67. Mutual funds are regulated in India by which among the following?

A) RBI

B) SEBI
C) Stock exchanges

D) RBI and SEBI both

ANS:- B

68. Consider the following statements in context with Treasury Bulls?

A) They are issued by Government of India on behalf of RBI

B) They are mostly for short term borrowings

C) Treasury Bills cannot be purchased by any person resident of India

D) None of These

ANS:- B

69. Which in the list is not an important feature of Secondary Market?

A) Accurate information should be available timely basis

B) Sufficient Liquidity

C) Efficient Transaction with high transaction cost

D) All the information should be reflected in stock within min time

ANS:- C

70. Book Building Process is associated with

A) IPO

B) Preference Share Allotment

C) Right issue

D) Private Placements

ANS:- A
71. Which type of stocks has ability to provide higher return

A) Cyclical Stocks

B) Speculative Stocks

C) Value Stocks

D) Growth Stocks

ANS:- C,D

72. Free Float methodology is used for which stock index

A) Nifty

B) DOWJONES

C) SENSEX

D) Nikkei

ANS:- C

73. Beta refers to

A) Operational Risk

B) Systematic Risk

C) Unsystematic Risk

D) Market Risk

ANS:- B

74. Which sector is not interest rate sensitive sector?

A) Real Estate

B) Banking

C) Auto
D) Pharmacy

ANS:- D

75. Which in the list signifies pessimism for a particular stock

A) Buy Call Option

B) Sell Call Option

C) Buy Stock

D) Buy Futures

ANS:- B

76. Which clearing house is the wholly owned subsidiary of NSE?

A) National Securities Clearing Corporation Ltd. (NSCCL)

B) India Index Services & Products Ltd. (IISL)

C) Clearing Corporation of India Ltd. (CCIL)

D) None of the above

ANS:- A

77. What does SENSEX stands for?

a) Sensor index

b) Sensitive index

c) Sensitive exchange

D) Sensitive Stocks

ANS:- B

78. In which year NSE launched Currency Derivatives?

A) 2009

B) 2008

C) 2003

D) 2006

ANS:- B

79. Which is the principal stock exchange of Switzerland?

A) Swiss Exchange

B) Stockholm Stock Exchange

C) Electronic Share Information

D) Santiago Stock Exchange

ANS:- A

80. Which is the largest Stock exchange in the world in terms of dollar value of its listed companies
stocks?

A) NYSE

B) Chicago Stock Exchange

C) FTSE

D) Stockholm Stock Exchange

ANS:- A

81. If an investment banker has agreed to sell a new issue of securities on a best-efforts basis, the issue

A. Most likely involves an unusually large stock offering.

B. Most likely involves bonds instead of common stock.

C. Results in no assumption of underwriting risk by the investment banker.

D. Most likely involves a well-established, large company.

ANS:- C

82. Which was the first Indian company to list on NYSE?

A) ICICI Bank

B) Wipro

C) Tata Motors

D) Infosys

ANS:- A

83. Which was the first Indian company to list on NASDAQ?

A) ICICI Bank

B) Wipro

C) Tata Motors

D) Infosys

ANS:- D

84. What is the full form of SEBI?

A) Stock Exchange Bureau of India

B) Stock Exchange Board of India

C) Securities Exchange Bureau of India

D) Securities and Exchange Board of India

ANS:- D

85. CAC 40 is the prominent stock index of which country?

A)Germany

B)France

C) US

D)Japan

ANS:- B

86. What is Dollex-30?

A) Dollar Version of Nifty

B) Dollar Version of BSE-200

C) Dollar Version of BSE Sensex

D) Dollar Version of BSE-100

ANS:- C

87. What is full form of NEAT which is the online trading system of the National Stock Exchange?

A) Nation’s Exchange for Automated Trading

B) National Exchange for Automated Trading

C) Nationwide Exchange for Automated Trading

D) None of the Above

ANS:- B

88. Which is the oldest exchange in Asia?

A) National Stock Exchange

B) Hong Kong Stock Exchange

C) Bombay Stock Exchange

D) Tokyo Stock Exchange

ANS:- C

89. NASDAQ stands for…

A) National Association of Securities Dealers Automated Quotation

B) National Stocks Data and Automated Quotes

C) North American Securities Data and Automated Quotations

D) Nation Association of Securities Dealers Automated Quotation

ANS:- A

90. What does NYSE stands for?

A) New York Shares Exchange

B) New York Stock Exchange

C) New York Sugar Exchange

D) New York Securities Exchange

ANS:- B

91. The movement from x to x’ in Exhibit 0195 represents a(n)

a. increase in roundabout production; future ability to produce consumer goods will be higher as a result

b. increase in roundabout production; future ability to produce consumer goods will be lower as a result

c. decrease in roundabout production; future ability to produce consumer goods will be higher as a
result

d. decrease in roundabout production; future ability to produce consumer goods will be lower as a
result

e. decrease in roundabout production but one that does not have an effect on future ability to produce
consumer goods

ANS:- a
92. The benefit of the production of capital is

a. decreased current production of consumption goods

b. increased future production of consumption goods

c. the amount of roundabout production

d. abundant capital accumulation

e. the decreased amount of future capital available

ANS:- b

93. Interest is a payment for deferred

a. taxation

b. saving

c. consumption

d. investment

e. none of the above

ANS:- c

94. Which of the following does not reflect a positive rate of time preference?

a. A couple gets a mortgage for a new house instead of saving up for it.

b. A print shop gives discounts to people who can wait overnight for their copies.

c. Mail companies charge people premiums for packages that must be delivered overnight.

d. Faster computers are more expensive than slower ones, other things equal.

e. Bank Christmas clubs pay no interest.

ANS:- e

95. If the interest rate increases from 6 percent to 10 percent per year, each $100 saved will earn
a. $4 per year more than before

b. $6 per year more than before

c. $10 per year more than before

d. $16 per year more than before

e. $60 per year more than before

ANS:- a

96. If we assume that a unit of capital will last indefinitely, the marginal rate of return on investment
equals the marginal revenue product of capital divided by its marginal resource cost.

a. True

b. False

ANS:- a

97. In order to predict marginal rates of return on investment, producers must forecast interest rates.

a. True

b. False

ANS:- b

98. The concept of marginal productivity is applicable to

a. all of the following

b. capital

c. entrepreneurial talent

d. land

e. labor

ANS:- a
99. Exhibit 0199 shows data on the various dough-mixing machines that a donut shop is considering
buying. Assume that any dough-mixing machine is expected to last indefinitely, that operating expenses
are negligible, and that the price of donuts is expected to remain constant in the future. If the interest
rate is 8 percent and the firm has $3,000 on hand, what should it do?

a. Buy the machine with the three-quart bowl, which costs $3,000.

b. Save $3,000 at the interest rate of 8 percent.

c. Buy the machine with the one-quart bowl and save the extra $2,000.

d. Buy the machine with the two-quart bowl and save the extra $1,000.

e. Buy two machines, with one-quart and two-quart bowls.

ANS:- c

100. IBM’s marginal rate of return on investment curve equals its

a. supply of loanable funds curve

b. supply of investment curve

c. marginal revenue product curve

d. marginal revenue cost curve

e. investment demand curve

ANS:- e

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