Top 350+ Solved Financial Markets and Institutions MCQ Questions Answer
Q. As a part of the capital adequacy requirement, the base minimum capital prescribed by SEBI:
a. varies from exchange to exchange.
b. is based on the recommendations of the Kaul committee.
c. is based on the recommendations of the Justice Bhagwati Committee.
d. is the same across members of all exchanges.
Q. Primary and secondary markets:
a. Compete with each other
b. Complement each other
c. Function independently
d. Control each other
Q. Which of the following is not a function of SEBI:
a. Development of the Securities market
b. Investor Protection
c. Making the Rules and Regulation for the securities market
d. Framing policies for central government operations
Q. The function of a financial system is to
a. establish a link between savers and investors
b. link commercial banks with the Central Bank of a country
c. create regulators for influencing the intermediaries
d. help traders and moneylenders in the capital market
Q. The liquidity status of certificate of deposit which is more negotiable is considered as
a. certified liquidity
b. term liquidity
c. more liquid
d. less liquid
Q. Which of the following statements about financial markets and securities are true?
a. A bond is a long-term security that promises to make periodic payments called dividends to the firm’s residual claimants.
b. A debt instrument is intermediate term if its maturity is less than one year.
c. A debt instrument is long term if its maturity is ten years or longer.
d. The maturity of a debt instrument is the time (term) to that instrument’s expiration date.
Q. The presence of transaction costs in financial markets explains, in part, why
a. financial intermediaries and indirect finance play such an important role in financial markets.
b. equity and bond financing play such an important role in financial markets.
c. corporations get more funds through equity financing than they get from financial intermediaries.
d. direct financing is more important than indirect financing as a source of funds.
Q. Financial intermediaries can substantially reduce transaction costs per dollar of transactions because their large size allows them to take advantage of
a. poorly informed consumers.
b. standardization.
c. economies of scale.
d. their market power.
Q. The presence of in financial markets leads to adverse selection and moral hazard problems that interfere with the efficient functioning of financial markets.
a. noncollateralized risk
b. free-riding
c. asymmetric information
d. costly state verification
Q. When the lender and the borrower have different amounts of information regarding a transaction,__________
a. asymmetric information
b. adverse selection
c. moral hazard
d. fraud
Q. When the potential borrowers who are the most likely to default are the ones most actively seeking a loan, _ is said to exist.
a. asymmetric information
b. adverse selection
c. moral hazard
d. fraud
Q. When the borrower engages in activities that make it less likely that the loan will be repaid, is said to exist.
a. asymmetric information
b. adverse selection
c. moral hazard
d. fraud
Q. The concept of adverse selection helps to explain
a. which firms are more likely to obtain funds from banks and other financial intermediaries, rather than from the securities markets.
b. why indirect finance is more important than direct finance as a source of business finance.
c. why direct finance is more important than indirect finance as a source of business finance.
d. only (A) and (B) of the above.