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SANKALP 2025
Economy - Prelims Questions DPP - 25

1. Consider the following statements: 4. Consider the following statements:

1. The face value of a share is stated by the 1. In the primary market, new shares are
issuer of the share. issued for the first time.
2. The market value of a share is the current 2. The secondary market is associated with
value of the share. the purchase and sale of already issued
Which of the statements given above is/are shares.
correct?
Which of the statements given above is/are not
(a) 1 only (b) 2 only
correct?
(c) Both 1 and 2 (d) Neither 1 nor 2
2. Consider the following statements: (a) 1 only (b) 2 only
1. Debenture holders can participate in the (c) Both 1 and 2 (d) Neither 1 nor 2
decision-making process; they used to
5. The term “T+1 Settlement” often seen in the
raise medium or long-term funds from the
news, refers to:
public.
(a) It is concerned with the settlement with
2. Shareholders are the owners of the
company; they receive dividends, which respect to transactions in the share market.
are basically a share in the profits of the (b) It is a mechanism for the early resolution
company. of disputes under the IBC (Insolvency and
Which of the statements given above is/are Bankruptcy Code).
correct? (c) It is the computer-assisted buying and
(a) 1 only (b) 2 only selling of stocks using computer strategies
(c) Both 1 and 2 (d) Neither 1 nor 2 to execute buy and sell orders within one
3. Consider the following statements with day of actual transactions.
reference to the Securities and Exchange Board
(d) None of the above.
of India (SEBI):
1. It came into effect before the 6. Consider the following statements:
independence of the country. 1. Bear investors believe that the market is
2. It was established to safeguard the headed downward.
interests of investors in the securities
2. Bull investors speculate that the market
market.
will go up.
3. It is a quasi-legislative and quasi-judicial
body. Which of the statements given above is/are
How many of the above statements are correct? correct?
(a) Only one (b) Only two (a) 1 only (b) 2 only
(c) All three (d) None (c) Both 1 and 2 (d) Neither 1 nor 2
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Answer

1. (c) 4. (d)
2 (b) 5. (a)
3. (b) 6. (c)
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Hints and Solutions

1. (c) considered to be
Option (c) is correct: creditors.
Statement 1 is correct: Face value is the Shareholders actively Debenture holders
monetary value stated by the issuer of any participate in the cannot participate in
share when issuing. The face value of the share decision-making the decision-making
is the company's net worth at the share's price process of the process.
on its first day on the stock market. company.
Statement 2 is correct: The market value of Shareholders are Since they have lent
the share is the current value of each share of entitled to receive money to the
a company. It is based on the current valuation dividends, which is company, debenture
of the company. The market value of shares is basically a share in holders are entitled to
the price at which respective securities are the profits of the receive interest.
traded in a stock exchange. It is essentially the company.
price at which one can purchase or sell any Despite generating Whether it generates
share or bond in the stock market. profits, a company profits or not, a
2. (b) may choose not to pay company is obligated
dividends to its to pay interest to its
Option (b) is correct:
shareholders. debenture holders.
Statement 1 is not correct: Debenture
holders cannot participate in the decision- 3. (b)
making process. Debenture holders are Option (b) is correct:
referred to as creditors. Debentures are Statement 1 is not correct: The Securities and
creditors because they lend money to the Exchange Board of India was established as a
corporation. Debt securities holders are not statutory body in 1992. The Securities and
permitted to participate in decision-making, Exchange Board of India Act (SEBI Act) came
whereas shareholders are. into force on January 30, 1992. It is a law that
Statement 2 is correct: A shareholder is a regulates the securities and exchange markets
person, corporation, or institution who owns at in India. Initially, it was established as a non-
least one share of a corporation's stock or a statutory body.
mutual fund. Shareholders own the company Statement 2 is correct: The SEBI Act
in essence, which comes with certain rights established the Securities and Exchange Board
and responsibilities. of India (SEBI) as a regulatory body to
Difference Between Shareholders and safeguard general public investment in the
Debentureholders: securities market. The Act has 7 chapters with
Shareholders Debenture Holders 35 sections. It has been empowered to oversee
the functioning of the securities market and
Shareholders are the Debenture holders are
the operation of intermediaries.
owners of the merely lenders to the
company. company and are

Statement 3 is correct: SEBI is a quasi-
legislative and quasi-judicial body that can
draft regulations, conduct inquiries, pass
rulings, and impose penalties.
4. (d)
Option (d) is correct:
Statement 1 is correct: A primary market is a
market wherein securities are issued for the
first time. In the primary market, securities are
created. Thus, it is also known as the ‘New
Issues Market’.
Statement 2 is correct: The secondary market
is the market wherein the issued shares of the
company are traded among investors. It is
also called the stock market. It is a market
wherein the investor purchases/sells the
securities from/to another investor. It includes
both the equity and debt market.
5. (a)
Option (a) is correct:
❖ A rolling settlement is the process of
settling security trades on successive
dates based upon the specific date when
the original trade was made so that
trades executed today will have a
settlement date one business day later than
trades executed yesterday.
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❖ The Securities and Exchange Board of
India (SEBI) has approved stock
exchanges to use the T+1 method to
complete share transactions. It was,
however, added as an optional feature to
improve liquidity in the economy.
❖ Under T+1, the deal is settled in one
working day, and the investor receives
the funds the next working day.
6. (c)
Option (c) is correct:
Statement 1 is correct: A bear is an investor
who believes that a particular security or the
broader
market is headed downward and may attempt
to profit from a decline in stock prices. Bear
investors take the market down.
Statement 2 is correct: A bull is a speculator
in a stock market who buys a holding in a stock
in the expectation that, in the very short term,
it will rise in value, whereupon it will sell the
stock to make a quick profit on the
transaction. Bull investors take the stock
market up.
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