Q5 economy 2 March

Qts1. Which one of the following is irrelevant in context of share market?

(A) Sensex

(B) BSE

(D) SAP

Ans. (D)

Exp:- Bombay Stock Exchange (BSE) is Asia's first stock exchange established in 1875 located at Dalal Street, Mumbai. It is the world's 11th largest stock exchange and the biggest in India. It accounts for almost 75% of total stocks traded in India.

O It was founded by Premchand Roychand. On August 31, 1957, the BSE became the first stock exchange to be recognized by the Indian Government under the Securities Contracts Regulation Act. There are at present four indices connected with the BSE:

(i) Sensex (The Sensitive Index):- It is a 30 stocks index of the BSE which was enlarged to include 50 stocks in 2000 but soon it was cut down to the original level. This index represents the Indian stock market. It is traded internationally on the EUREX (European Exchange) as well as leading exchange of the BRICS nations (Brazil, Russia, India, China and South Africa).

(ii) BSE-200:- This is a 200 stock share index of the BSE (including the 30 stocks of the Sensex) which has its Dollar version too-the Dollex.

iii) BSE-500:- In mid-1999, the BSE came up with a 500-stock index representing major industries & many sub-sectors of the economy with information technology getting a significant weightage.

iv) National Index:- An index of 100 stocks being quoted nationwide (Bombay, Delhi, Kolkata etc.) was developed to give broader representation of the stock market. The 30 stocks of the SENSEX are included in the National Index.

This index is computed by the Statistics Department of the BSE in which calculation of sensex is done by assigning proportional weightage to stocks.

One of the unique features in the BSE includes the automatic online trading system known as BOLT that ensures an efficient and transparent market for trading in equity, debt instruments and derivatives. National Stock Exchange (NSE) was established in 1992 & became operationalised in 1994 located in Mumbai.

It is the world's 12th largest stock exchange (2017). It was set up by the group of leading Indian financial institutions including Life Insurance Corporation of India (LIC), State Bank of India (SBI), IDBI and GIC with IDBI as its promoter. It has a 50 share index known as NIFTY which is the leading index for large companies on the National Stock Exchange of India.

SAP is irrelevant in context of share market as it is one of the largest software organisation like oracle

Qts 2.Which of the following statements in relation to Bombay Stock Exchange, is correct?

(A) It is the oldest stock exchange of India.

(B) It is known by the name of Dalal street.

(D) All of the above.

Ans.(D)

It was founded by Premchand Roychand. On August 31, 1957, the BSE became the first stock exchange to be recognized by the Indian Government under the Securities Contracts Regulation Act. There are at present four indices connected with the BSE:

(ii) BSE-200:- This is a 200 stock share index of the BSE (including the 30 stocks of the Sensex) which has its Dollar version too-the Dollex.

iii) BSE-500:- In mid-1999, the BSE came up with a 500-stock index representing major industries & many sub-sectors of the economy with information technology getting a significant weightage.

This index is computed by the Statistics Department of the BSE in which calculation of sensex is done by assigning proportional weightage to stocks.

SAP is irrelevant in context of share market as it is one of the largest software organisation like oracle

Qts 3 . Which of the following is correctly matched?

(A) Bombay Stock Exchange: SENSEX

(B) National Stock Exchange: NYSE

(D) London Stock Exchange: ΝΙΚΚΕΙ

Ans. (A)

Exp:- BSE explained in answer 1.

NSE explained in answer 1.

New York Stock Exchange (NYSE and nicknamed "The Big Board") is an American Stock Exchange located at 11 wall street, New York. It is the world's largest stock exchange. Its indices are Dow Jones, S & P 500, NYSE composite. Its currency is US Dollar. Dow Jones composed of the 32 most traded stocks of the NYSE.

London Stock Exchange is located in London, England. It is the third largest stock exchange. Its currency is Pound Sterling. Its indices are FTSE 100 Index, FTSE 250 Index, FTSE 350 Index, FTSE small cap Index, FTSE All-share index.

NIKKEI Index is a stock market index of the Tokyo Stock Exchange (TSE). Another major index for the Tokyo Stock Exchange is the Tokyo Stock Price Index (TOPIX).

Hang Seng Index is a stock market index in Hong Kong. It is comprised of 50 companies.

Qts 4. Which of the following pairs are correctly matched?

1. Dow Jones. New York

2. Hang-Seng. Seoul

3. FTSE-100. London

Select the correct answer using the codes given below-

(A) 1, 2 and 3

(B) 2 and 3

(D) 1 and 3

Ans. (D)

Exp:- BSE explained in answer 1.

NSE explained in answer 1.

NIKKEI Index is a stock market index of the Tokyo Stock Exchange (TSE). Another major index for the Tokyo Stock Exchange is the Tokyo Stock Price Index (TOPIX).

Hang Seng Index is a stock market index in Hong Kong. It is comprised of 50 companies.

Qts 5. Word 'Bull' and 'Bear' are associated with which branch of commercial activity?

(A) Foreign trade

(B) Share Market

(D) Manufacturing

Ans. (B)

Exp:- The expressions 'Bulls' and 'Bears' are related to stock exchange. A stock exchange is a platform for trading shares-either physical or virtual.

Bull is an investor who believes that the market will go up. Bull market is characterized by rising prices over a long period of time. It represents lower interest rates and economic growth.

BEAR is an investor who believes that the market will go down. Bear Market is a sustained period of falling stock prices usually accompanied by a period of poor economic performance known as recession.

Qts6 . In the parlance of financial investment, the term 'bear' denotes-

(A) An investor who feels that the price of a particular security is going to fall.

(B) An investor who expects the prices of particular shares to rise.

(D) Any lender whether by making a loan or buying a bond.

Ans.(A)

Exp:- The expressions 'Bulls' and 'Bears' are related to stock exchange. A stock exchange is a platform for trading shares-either physical or virtual.

Bull is an investor who believes that the market will go up. Bull market is characterized by rising prices over a long period of time. It represents lower interest rates and economic growth.

Qts 7. Which one of the following organisation is the main regulator of stock markets in India?

(A) Controller of Capital of Stocks

(B) Ministry of Finance

(D) Security and Exchange Board of India.

Ans. (D)

Exp:- The capital markets in India are regulated by the Securities & Exchange Board of India (SEBI).

It was established in 1988. It was given statutory basis in 1992 on the basis of Parliamentary Act- SEBI Act 1992 to regulate and develop capital market. Its head office is in Mumbai & with three regional office in New Delhi, Calcutta & Chennai. Main functions of the Board as per the SEBI Act, 1992 are:-

(i) SEBI regulates the working of stock exchanges and intermediaries such as stock brokers and merchant bankers, accords approval for mutual funds.

(ii) Registers Foreign Institutional Investors who wish to trade in Indian stocks.

(iii) Promotes investor's education and training of intermediaries of securities market.

(iv) Inspection and audit of stock exchange and also prohibits unfair trade practices relating to securities market.

(v) Levying various fees and other charges (as 1% of the issue amount of every company issuing share are kept by it as a caution money in the concerned stock exchange where the company is enlisted)

Qts 9 . A rise in 'Sensex' Means-

(A) A rise prices of shares of all companies registered with Bombay Stock Exchange

(B) A rise in prices of shares of all companies registered with National Stock Exchange

(D) A rise in prices of shares of all companies belonging to a group of companies registered with Bombay stock exchange.

Ans. (C)

Exp:- SENSEX (Sensitive Index) is a value-weighted index composed of 30 companies. With the base 1978- 79 = 100 It consists of the 30 largest and most actively traded blue chip stocks (profit making) representative of various sectors on the BSE.

A rise in 'SENSEX' means an overall rise in price of shares of group of companies registered with Bombay Stock Exchange. Each of the 30 stocks in the SENSEX has a weight attached to it. This weight depends on the market capitalisation of the stock. Market capitalisation refers to the number of shares of a company multiplied by its market value (the price of each share). But in 2003, SENSEX shifted to the free-float weightage method. Here, a company's entire lot of shares are not taken into account i.e. market capitalisation but only the shares readily available for trading are considered.

Qts 10 . Under which of the following circumstances may 'Capital gains' arise?

1. When there is an increase in the Sales of a product.

2. When there is a natural increase in the value of the property owned.

3. When you purchase a painting and there is a growth in its value due to increase in its popularity.

Select the correct answer using the codes given below-

(A) Only 1

(B) 2 and 3

(D) 1, 2 and 3

Ans. (B)

Exp:- Capital gain refers to increase in the value of a capital asset such as stock, bond or real estate that gives it a higher worth than the purchase price. The gain is not realised until the asset is sold. A capital gain may be short-term (one year or less) or long term (more than one year). Capital gains are taxable but only when they are realized i.e. when the asset is sold. Capital Gain = Sales Price - Purchase Price When there is an increase in the sales of a product, it does not clearly shows the increase in worth than the purchase price. When there is a natural increase in the value of the property owned ensures higher sales price. When one purchase a painting and there is growth in its value due to increase in its popularity, it will guarantee the higher worth than the purchase price.

Qts 11.Which of the following is not a speculator in stock Exchange?

(A) Bull

(B) Bear

(D) Stag

Ans. (C)

Exp: Broker is a registered member of a stock exchange who buys or sells shares/securities on his client's behalf and charges a commission on the gross value of the deal- such brokers are also known as commission brokers. Brokers who offer services such as investment advice, clients portfolio planning, credit when a client is buying on margin other than their traditional commission job are known as full service brokers. Hence, broker is not a Speculator.

Bull is an investor who believes that the market will go up. Bull market is characterized by rising prices over a long period of time.

Bear is an investor who believes that the market will go down. Bear Market is a sustained period of falling stock prices.

Stag is an investor or speculator who subscribes to a new issue, expecting the price of the stock to rise immediately upon the start of trading is known as a stag. The sole aim of a stag is to sell the shares soon after allotment to realise a quick profit.

Qts 12 . Insider trading is related to-

(A) Share market

(B) Horse racing

(D) International trade

Ans. (A)

Exp:- Insider trading occurs when anyone with information related to strategic and price-influencing information, purchases or sells stocks so as to make speculative profits.

Insider trading can be illegal or legal depending on when the insider makes the trade. It is illegal when the material information is still non-public. SEBI is formulating rules which are tougher for the insider trading.

Qts 13. Blue Chip means-

(A) Share guaranteed by the government

(B) Share listed in stock Exchange

(D) None of these

Ans. (C)

Exp:- Blue Chip shares are the shares of the companies that are the most valuable. Companies that are profit making, usually dividend-paying and are liquid in the market-that is there is almost always demand in the market.

A blue chip is a nationally recognised, well- established and financially sound company. Blue Chip companies operate profitably in the face of adverse economic conditions, which helps to contribute to their long record of stable and reliable growth.

The name 'blue chip' came about from the game of poker in which the blue chips have the highest value

Qts 14 . 'Dalal Street ' is situated at-

(A) New Delhi

(B) London

(D) Pairs

Ans. (C)

Exp:- Bombay Stock Exchange and several related financial firms and institutions are located at Dalal street in Mumbai. The Hindi word dalal means 'a broker'. Similar to wall street in the New York city, it is often used as metonym for the entire Indian financial establishment.

Qts 15.Capital Market means-

(A) Share market

(B) Commodity Market

(D) all of the above

Ans. (A)

Exp: Capital Market means Share Market. a market where buyer and Capital Market and Money Market both are part of Financial Market. Financial Market is sellers trade in financial assets like Stock, Bonds. Commodities and Currencies. Financial Market includes various components some of them are as follows:-

Financial Market

Capital Market

Money Market

Money Market: It is a place where borrowing and

lending in short term is done. The maturity time of assets under Money Market is usually 365 days or less than 1 year. Money Market includes assets under organized as well unorganized Market. Like Commercial bills, Hundis etc.

Capital Market: is a market which usually deals in long-term assets i.e. greater than one year. Capital Market deals with instruments like share, Bonds equities, mortgages and other long-term investments.

Qts 16. SEBI was established in the year-

(A) 1988

(B) 1990

(D) 1985

is. (A)

Exp:- Securities and Exchange Board of India (SEBI) is he regulatory body for all the securities. It was established in 1988 with the objectives like:-

i) Protecting the interest of investors in securities.

ii) Promoting the development of securities market.

iii) Regulation of securities market.

Later, it was given statutory status through SEBI Act, 1992 in April, 1992.

Functions of SEBI are as follow:-

(i) Review of market operation, and business in the stock exchanges.

(ii) Registration and Regulation of working of intermediaries.

(iii) Registration and Regulation of Mutual Funds, Venture Capital funds and Collective investment schemes.

(iv) Prohibiting Fraudulent and Unfair Trade practices in share market

(v) Prohibiting Insider Trading.

(vi) Promoting investor education and training of intermediaries.

(vii) Preventing scams in capital Market.

(viii) Performing such functions and exercising such powers under the securities contracts Act, 1956 as may be delegated to it by Central Governments.

Qts 17.The Insurance Regulatory and Authority was set up in India on-

(A) April 2000

(B) April 2001

(D) April 2003

Ans. (A)

Exp:- Insurance Regulatory and Development Authority is the regulatory body for the insurance sector. It was established by Insurance Regulatory and Development Authority Act 1999; in April 2000.

IRDA Mission are as follow:-

(i) To protect the interests of the policy holders.

(ii) To promote, regulate and ensure orderly growth of insurance industry.

(iii) Conduction of insurance business of insurance and reinsurance.

(iv) To regulate and develop the business of insurance and reinsurance

The main objective of setting IRDA was to promote market efficiency and ensure consumer protection.

Functions of IRDA are as follow:-

(i) Registration and renewal of registration of insurance companies

(ii) Licensing of insurance intermediaries such as agents, brokers etc.

(iii) Training of agents.

(iv) Monitoring pricing, terms and conditions etc.

(v) Supervising intermediaries.

(vi) Consumer education.

(vii) Enforcement of discipline

Qts 18. The 'Gilt edge' market deals in-

(A) Worn and torn currency notes

(B) Bullion

(D) Corporate Bonds

Ans. (C)

Exp:-The 'Gilt edge' market deals in government securities. The 'Gilt edged securities' term is basically a British phrase that was referred to debt securities that were issued by the Bank of England.

The name Gilt edged was given because original debt securities in initial days featured a gilded edge.

Basically Gilt edge securities are those instruments issued by national governments to borrow money from the market.

So, Gilt edge market is that Market in which government securities i.e. Gilt edged securities or the securities guaranteed by government are exchanged or dealt in.

Qts 18.Debenture holders of a company are the-

(A) Shareholders

(B) Creditors

(D) Directors

Ans. B

Exp : Debenture of a company is loan instrument, raised by a company in the form of loan capital. In this, ownership passes to company, and company for this exchange provide consumer interest regularly and principal amount on Maturity. Ultimately, Debenture holder of a company are creditors which had given their extra money on loan to company, to earn interest on it

Qts 19 .The financial instrument, through which Indian companies can raise money from overseas market in Rupees, is known as-

(A) RBI Bonds

(B) Gold Bonds

(D) Overseas Bonds

Ans (C)

Exp:- Masala bond is a generic term referred to those financial instrument through which Indian companies can raise money from overseas market in the rupee denomination.

Rupee denomination protect issuers from currency risk rather rupee denomination transfers the risk to investors who bought these bonds. Because Masala bonds at the time of maturity had to be paid in rupees value only; not in dollar or any other currency.

In June 2015, International Finance Corporation issued rupee-denominated borrowing bonds in international market. IFC came up with two terminologies i.e. Maharaja bonds and Masala bonds. Maharaja bonds are issued to Indian investors and masala bonds to overseas investors. IFC named Masala bonds as Masala to reflect the spiciness and culture of India like Chinese Dim-Sum bonds named after a popular dish in Hong-Kong. Minimum Maturity period is 3 years and maximum amount that can be raised through automatic route is 50 billion Rs

Qts 20. Which among the following agency regulates the Mutual funds in India?

(A) SEBI

(B) National Stock Exchange

(D) Indian Bank Association

Ans. (A)

Exp:- Mutual funds are regulated by SEBI (Securities and Exchange Board of India)

Along with SEBI acting as primary regulator, mutual funds are also regulated by RBI, companies Act, India Trust Act and Ministry of Finance.

Role of RBI

- RBI acts as a regulator of bank sponsored mutual funds.

To provide guarantee return, mutual funds need to get approval from RBI.

Role of Ministry of Finance

Ministry of Finance act as supervisor of RBI and SEBI.

It acts as an appellate authority.

Qts 21.The Apex hand for providing Agricultural Refinance in India is-

(A) RBI

(B) NABARD

(D) SBI

Ans. (B)

Exp: The Apex bank for providing Agricultural Refinance in India is NABARD.

The importance of credit in agriculture is a well known thing. Before 1982, the function of providing agricultural refinance was given to RBI and RBI due to its vast functioning and knowing importance of agriculture insisted Government of India to constitute a committee that can review current agricultural credit arrangement. So, B. Sivaraman committee was formed in 1979.

On the recommendation of Sivaraman Committee, National Bank for Agriculture and Rural Development (NABARD) was formed and came into existence on 12 July, 1982 with the broader vision as Development Bank of the nation for fostering rural prosperity.

Qts 22 .Who among the following is the present Governor of Reserve Bank of India?

(A) D. Subba Rao

(B) C. Ranga Rajan

(D) Shaktikanth Das

Ans.D

Exp:- Shaktikanth Das is the present Governor of Reserve Bank of India.

The Governor of RBI is the head of the Central Bank of India. The term of RBI Governor is 3 years.

Osborne Smith was the first governor of RBI, while C.D. Deshmukh was the first Indian Governor of RBI.

Bengal Rama Rao is maximum served governor i.e. 7 year 197 days.

Now 25th Governor of RBI is Dr. Shaktikanth Das

Roles of RBI Governor:-

Custodian of country's reserves

Defender of the external value of the currency

Responsible to maintain the financial stability.

Currency notes bears governor's signature.

Control and supervise monetary policy.

Management of licensing to new banks, interest rates, Foreign Exchange Manage-ment Act, issue and exchange of currency & coins.

Governs the Urban Cooperative banks

Management of poverty Alleviation schemes.

Qts 23. Consider the following statements-

1. The repo rate is the rate at which other banks borrow from the Reserve Bank of India

2. A value of pliefor 40 deg Gini Co-efficient in country implies that there is perfectly equal income for everyone in its population.

Which of the statement (s) given above is/are correct?

(A) Only 1

(B) Only 2

(D) Neither 1 nor 2

Ans. (C)

Exp:- Both the statement given are correct.

Repo rate is the rate at which RBI lends money to other commercial banks for a short term.

In other words, it is the rate at which other banks borrow from RBI. Repo or in other words Repurchase obligation is an instrument of short term borrowing where banks provides it securities to RBI and receive funds in exchange.

Gini coefficient measures the inequality prevailing in a region by using values of a frequency distribution

.: When Gini coefficient is '0' Expresses perfect equality where everyone has equal income

When Gini coefficient is '1'

Expresses perfect inequality where only one person has all income.

Hence, Both the statements are correct.

Qts 24. Consider the following statement regarding Reserve Bank of India-

1. It is a banks to the central Government

2. It formulates and administer monetary policy

3. It acts as an agent of government in re- spect of India

4. It handles the borrowing programme of Government of India.

Which of these statements are correct?

(A) 1 and 2

(B) 2, 2 and 4

(D) 3 and 4

Ans. (C)

Functions of RBI

Financial Supervision

Commercial banks

Financial institutions

Non-banking finance companies

Supervisory rating Model for banks

Monetary Authority

Formulate implement and monitoring

monetary policy

Maintaining price stability

Regulate money supply

Promotional function

Banker to the Government

Merchant banking functions for the central and state government

Banker to banks

Lender of the last resort

Maintaining banking account of all scheduled banks Handles the Government borrowing programme of India

Fully owned by RBI

Deposit Insurance and credit guarantee corporation of India [DICGC]

Regulatory functions

Broad parameters of banking operations

Maintain public confidence in system

Management

Foreign Exchange

National Housing Bank [NHB]

Bhartiya Reserve Bank Note Mudran Private limited [BRBNIMPL]

Qts 25. Which of the following is not a function of Reserve Bank of India?

(A) Regulation of currency

(B) Regulation of foreign trade

(D) Custody and management of country's foreign exchange reserved

Ans. (B)

Exp:- Regulation of foreign trade is not a function of Reserve Bank of India.

As we have seen in above question explanation, RBI is issuer and depositor of new and old currency respectively, that directly means RBI has regulation of currency.

Option C regulation of credit, Under RBI's monetary authority RBI also regulate money supply that directly effects credit supply. Hence, Regulation on credit is one of the functions of RBI.

Option D is directly mentioned under manage- ment functions of RBI. But option B is not a functions of RBI rather it comes under the domain of Ministry of External Affairs.

Qts 26. Who is the 'lender of the last resort' in the banking structure of India?

(A) State Bank of India

(B) Reserve Bank of India

(D) Union Bank of India

Ans. (B)

Exp:- Reserve Bank of India is the lender of the last resort' in the banking structure of India.

Lender of the last resort is generally central bank of country. Because usually central bank of any country is the institution which lends money to other domestic banks when these banks seems to be facing an adverse financial conditions or considered to be high at risk.

Qts 27 _____is the official minimum rate at which the Central Bank of a country is prepared to rediscount approved bills held by the commercial banks.

(A) Repo rate

(B) Bank rate

(D) Reverse repo rate

Ans. (B)

Exp:- Bank rate is the official minimum rate at which the Central Bank of a country is prepared to rediscount approved bills held by the commercial banks.

Bank rate is official interest rate that RBI will charge on loans given to banking system including commercial banks, cooperative Banks etc.

These loans are provided either directly or indirectly through rediscounting (buying back) the securities. Thus, Bank rate is also called as discounting rate.

In simple words Bank rate is the rate at which RBI

lends money to other bank. Increasing and decreasing it directly decreases and

increases money supply or liquidity in the market. Repo rate is the rate at which RBI lends money to banking system but this facility is available for short term.

Prime lending rate is the minimum rate at which banks will give loan to their favored customers like customers with huge worth or customers with good credibility.

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Q5 economy 2 March

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