Finance Awareness

1. Money market mutual funds are seen as secure investments for which of the
following reasons ? (Ch-2, Pg 10)
a) Good quality short - term debt securities.
b) Long - term debt securities and cash equivalents.
c) Cash and cash equivalents only.
d) Both b and c.
e) Good quality short-term debt securities, cash, and cash equivalents.

2. Money market mutual funds are considered suitable investments for which of the
following instances ? (Ch-2, Pg 10)
a) A sum of cash cannot be expected by the investors anytime they want.
b) Investor may never exchange their money market mutual fund holdings for shares
of the other funds in the fund family.
c) Investor must occasionally transfer assets from one fund to another.
d) The client can earn an extra percentage point in annual returns above those
earned by other possible investments.
e) None of the above.

3. Why is the best option for a company is to take money from people, in order to
issue shares in equity market ? (Ch-3, Pg 11)
a) Companies wants to raise their revenue and they take money only from
people.
b) Companies always wants to raise their revenue, for that they need to take
loan from bank.
c) Companies neither take loan from bank nor from people.
d) Companies take loan both from bank and from people.
e) Companies always wants to raise their revenue, for that they may
either take loan from bank or they take money from people.

4. The Indian capital marketplace is dominated by ? (Ch-3, Pg 13)

A) IRDA
 B) SEBI
C) RBI
D) NABARD
E) SBI

5. Any business must determine the maximum amount of capital that may be
generated by issuing equity shares in its Memorandum of Associations.
Nevertheless, the restriction can be raised by paying additional costs and
completing specific legal processes. This is what is known as ? (Ch-3, Pg 11)
A) Issued Share Capital
B) Authorised Share Capital
C) Paid-Up Capital
D) Unauthorised Share Capital
E) Memorandum Capital

6. Which of the following terms includes an additional shares given to existing

shareholders for complimentary or as an incentive ? (Ch-3, Pg 11)
A) Bonus Shares
B) Complimentary Shares
C) Incentive Shares
D) Voting and Non-Voting Shares
E) Voting Shares

7. This term represents the number of the company's equity which has been made
accessible to investors via the issuing of equity shares. (Ch-3, Pg 11)
A) Paid-Up Capital
B) Equity Capital
C) Issued Share Capital
D) Authorised Share Capital
E) Share Capital

8. Bonus Shares refers to ? (Ch-3, Pg 11)

A) Extra shares provided to existing owners for freely or as an incentive.
 B) Before making additional shares accessible for trade on stock exchanges,
a firm might offer them to its existing shareholders at a predetermined price
and period.
C) A company that may prorate dividend payouts by issuing shares instead of
cash.
D) If you have significantly contributed while working for the firm, you may
be given sweat equity shares.
E) Even though the plurality of stocks have voting rights, the company may
award stockholders unequal or no right to vote.

9. A company that may prorate dividend payouts by issuing shares instead of cash is
called ? (Ch-3, Pg 11)
A) Growth Shares
B) Dividend Shares
C) Cumulative Preference Shares
D) Non-Cumulative Preference Shares
E) Value Shares

10. A business can issue new shares to its present owners at a predetermined price as
well as within a set duration before making them public for trade on stock
exchanges, according to the concept of __________. (Ch-3, Pg 11)
A) Bonus Shares
B) Sweat Shares
C) Issued Shares
D) Right Shares
E) Value Shares

11. If you have contributed immensely while working for the firm, you may be given
which of the following shares ? (Ch-3, Pg 11)
A) Sweat Equity Shares
B) Bonus Shares
C) Equity Shares
D) Right Shares
E) Value Shares
12. Voting and Non-Voting Shares means which of the following ? (Ch-3, Pg 11)
A) Even though the plurality of stocks have voting rights, the company
may award stockholders unequal or no right to vote.
B) If you have significantly contributed while working for the firm, you may
be given sweat equity shares.
C) Before making additional shares accessible for trade on stock exchanges,
a firm might offer them to its existing shareholders at a predetermined price
and period.
D) A business can issue new shares to its present owners at a predetermined
price as well as within a set duration before making them public for trade on
stock exchanges.
E) None of the above.

13. Which of the following is NOT a category of Equity Share ? (Ch-3, Pg 12)
A) Value Shares
B) Dividend Shares
C) Growth Shares
D) Bonus Shares
E) None of the above

14. Which of the following shares allow investors to receive income declared by the
corporation before they are distributed to equity holders ? (Ch-3, Pg 12)
A) Value Shares
B) Growth Shares
C) Dividend Shares
D) Equity Shares
E) Preference Shares

15. Which of the following is/are a category of Preference Shares ? (Ch-3, Pg 12)
A) Value Shares
B) Convertible or Non-Convertible Shares
C) Voting and Non-Voting Shares
D) Cumulative & Non-Cumulative Shares
 E) Both B and D

16. _______________ advantages are NOT offered by non-cumulative shares. (Ch-3,

Pg 12)
A) Receiving dividends
B) Unpaid dividends
C) Paid dividends
D) Redeemable dividends
E) Cumulative dividends

17. Which of the following shares DO NOT offer any advantages other than
receiving dividends on a regular basis ? (Ch-3, Pg 12)
A) Non-Convertible Preference Shares
B) Participating Preference Shares
C) Non-Participating Preference Shares
D) Non-Cumulative Preference Shares
E) Irredeemable Preference Shares
18. Which one of the below company shares can be changed to equity shares
following meeting the conditions outlined in the company's Articles of
Association (AoA) ? (Ch-3, Pg 12)
A) Participating Preference Shares
B) Redeemable Preference Shares
C) Non-Convertible Preference Shares
D) Association Preference Shares
E) Convertible Preference Shares

19. Which one of the below shares has neither maturity period nor any other
restrictions such as particular price or time ? (Ch-3, Pg 12)
A) Redeemable Preference Shares
B) Irredeemable Preference Shares
C) Inconvertible Preference Shares
D) Immature Preference Shares
E) Unrestricted Preference Shares
20. Which of the following is a component of the financial market-serving
infrastructure for the collection of funds for public sector firms, governments, and
organizations ? (Ch-3, Pg 12)
A) Indenture
B) Debentures
C) P-Notes
D) Bond markets
E) Debt Instruments

21. The bond market cannot be called as ? (Ch-3, Pg 12)

A) Debt market
B) Credit market
C) Fixed income market
D) Broker market
E) None of the above

22. For which of the following reasons most of the bonds are held by institutions ?
(Ch-3, Pg 12)
A) The major bond market participants are governments.
B) Bond markets are generally decentralized.
C) Bond market is less volatile in nature than the stock market.
D) The bonds are usually specific to individual issues and there is a lack
of liquidity in the bonds.
E) None of the above

23. Governments, institutional investors, traders, and individual investors are

essential members or participants of ? (Ch-3, Pg 12)
A) Stock Market
B) Securities Market
C) Bond Market
D) Commodity Market
E) Capital market

24. Which of the following statements is correct about bond market ? (Ch-3, Pg 12)
 A) Bond markets are generally centralized.
B) There exists no common exchange.
C) The stock market is more volatile than the bond market.
D) The bond market is more volatile than the stock market.
E) Both B and E

25. Which of the following is the major risk that occurs in bond investment ? (Ch-3,
Pg 12)
A) The volatility of the bond market affects interest rate.
B) The monetary policy of the country affects interest rate.
C) The change in interest rate.
D) Both A and B
E) None of the above

26. The interest rate and value of bond are ? (Ch-3, Pg 12)
A) Directly proportional to one another
B) Not proportional to one another
C) Equal
D) Inversely proportional to one another
E) Not related

27. The interest rate fluctuation depends on which of the following factors ? (Ch-3,
Pg 12)
A) Governments, institutional investors, traders, and individual investors.
B) Institutions like banks, mutual funds, and pension funds.
C) Volatility of the bond market.
D) Monetary policy of the country.
E) Both C and D

28. Which one of the below is an unsecured loan supported by the issuer's
trustworthiness and reputation and recorded by a contract ? (Ch-3, Pg 12)
A) Debt Instruments
B) Debentures
C) Collaterals
 D) Commodity
E) Indenture

29. Which of the following statements is NOT correct ? (Ch-3, Pg 12)

A) Debentures are long-term Debt Instruments, which are backed by
Collaterals.
B) Debentures are issued usually by small companies with moderate bond
ratings.
C) Bond market is a financial market that acts as a platform for shareholders
with differential or no voting privileges.
D) Bond market can also be called the stock market, commodity market, or
fixed income market.
E) All of the above.

30. Debentures are different from Bond on what basis ? (Ch-3, Pg 12)
A) Creditworthiness and reputation
B) Terms and conditions of securitization
C) Interest rate and value of bond
D) Both B and C
E) None of the above

31. A _______________ is regarded as an unsecured investment because there are no

pledges (guarantee) or liens available on particular assets. (Ch-3, Pg 12)
A) Bonds
B) Debentures
C) Bond market
D) Indenture
E) None of the above

32. Which of the following statements is false ? (Ch-3, Pg 13)

A) Debentures are referred to as freely negotiable Debt Instruments.
B) Debentures are regarded as an unsecured investment.
C) Debentures are long-term Debt Instruments.
D) Bonds are also termed as Debentures but Debentures are not termed as
Bonds.
E) If a bankruptcy occurs, Debenture holders are treated as general creditors.

33. _________________ are offshore derivative instruments with Indian shares as

underlying assets. (Ch-3, Pg 13)
A) Anonymity
B) Indenture
C) P-notes
D) Debentures
E) None of the above

34. P-notes are used for making investments in the ______ markets. (Ch-3, Pg 13)
A) Bond
B) Stock
C) Commodity
D) Anonymity
E) Debentures

35. Participatory notes are registered with ? (Ch-3, Pg 13)

A) SEBI
B) RBI
C) SBI
D) NABARD
E) None of the above

36. Overseas investors who are not registered with SEBI have to go through a lot of
scrutiny, such as ? (Ch-3, Pg 13)
A) KBC
B) KVPY
C) KYC
D) KPC
E) PTS
37. Any entity investing in participatory notes is not required to register with SEBI,
whereas all FIIs have to compulsorily get registered is termed as ? (Ch-3, Pg 13)
A) Tax saving
B) Anonymity
C) Ease of trading
D) Both A and B
E) None of the above

38. Trading through participatory notes is easy because they are like contract notes
transferable by endorsement and delivery refers to ? (Ch-3, Pg 13)
A) Anonymity
B) Tax saving
C) Ease of trading
D) Transferables
E) None of the above

39. Tax saving refers to ?

A) Any entity investing in participatory notes is not required to register with
SEBI, whereas all FIIs have to compulsorily get registered.
B) Large hedge funds to carry out their operations without disclosing their
identity.
C) Trading through participatory notes is easy because they are like contract
notes transferable by endorsement and delivery.
D) Some of the entities route their investment through participatory
notes to take advantage of the tax laws of certain preferred countries.
E) A company takes controlling ownership in a business entity in another
country.

40. Which of the following statements is false ? (Ch-3, Pg 13)

A) Indian regulators are not very happy about participatory notes because
they have no way to know who owns the underlying securities.
B) It is alleged that a lot of unaccounted money made its way to the country
through the participatory note route.
 C) Investing through P-Notes is very complex and hence unpopular
amongst FIIs.
D) P-Notes aid investors who do not want to register with SEBI and reveal
their identities to take positions in the Indian market.
E) None of the above.

41. A company takes controlling ownership in a business entity in another country.

This refers to ? (Ch-3, Pg 13)
A) Automatic route
B) Government route
C) Foreign Direct Investment
D) Government route
E) None of the above

42. The non-resident or Indian company does not require prior nod of the RBI or
government of India for FDI refers to ? (Ch-3, Pg 13)
A) Govt route
B) Automatic route
C) Securities Market
D) Foreign Portfolio Investment
E) None of the above

43. DPIIT stands for ? (Ch-3, Pg 13)

A) Department for Production of Industry and Internal Trade
B) Department for Promotion of Investment and Internal Trade
C) Department for Processing of Industry and International Trade
D) Department for Promotion of Industry and International Trade
E) Department for Promotion of Industry and Internal Trade

44. Which of the following is a common way to invest in overseas economies which
include stocks, bonds, mutual funds. (Ch-3, Pg 14)
A) FPI
B) BOP
C) ETF
 D) ADR
E) None of the above

45. FPI stands for ? (Ch-3, Pg 14)

A) Foreign Payment International
B) Faster Payment Incoming
C) Faster Portfolio Investment
D) Foreign Payment Investment
E) Foreign Portfolio Investment

46. ADRs stands for ? (Ch-3, Pg 14)

A) American Deposit Receipts
B) Australian Depositary Receipts
C) American Depositing Receipts
D) Australian Debenture Receipts
E) American Depositary Receipts

47. ETFs stands for ? (Ch-3, Pg 14)

A) Export Traded Funds
B) Exchange Traded Funds
C) External Transport Funds
D) Exchange Transfer Funds
E) External Traded Funds

48. A _____________ is a marketplace for buying, selling, and trading raw materials
or primary products.(Ch-3, Pg 14)
A) Bond Market
B) Commodity Market
C) Debentures Market
D) Bonds
E) None of the above

49. Which of the following statements is false ?

A) Commodities are often split into three broad categories.
 B) Hard commodities include natural resources.
C) Soft commodities are livestock.
D) Both A and C
E) None of the above

50. Which of the following are Hard commodities ?

A) Gold, rubber, and oil.
B) Sugar, soybeans, and pork.
C) Corn, wheat and coffee.
D) Both A and B
E) None of the above

51. Which among the following is also a Hard commodity ?

A) Edible oil
B) Crude oil
C) Shark liver oil
D) Mustard oil
E) Liver oil