business studies - financial markets

Class 12 - Business Studies

Financial Markets

Q&A
Question:

What are the functions of a Financial Market?

Answer:

Financial market plays an important role in the allocation of scarce resources in an economy by performing the following four important functions
(i) Mobilisation of Savings and Channelising Them into the Most Productive Uses
A financial market facilitates the transfer of savings from savers to investors. It gives choice to the saver of different investments and thus, it helps to channelise surplus funds into the most productive use.
(ii) Facilitate Price Discovery
In a financial market, the households are suppliers of funds and business firms represent the demand. The interaction between them helps to establish a price for the financial asset which is being traded in that particular market.
(iii) Provide Liquidity to Financial Assets
Financial markets facilitate easy purchase and sale of financial assets. Flolders of assets can readily sell their financial assets through the mechanism of financial market.
(iv) Reduce the Cost of Transactions
Financial markets provide valuable information about securities being traded in the market. It helps to save time, effort and money that both buyers and sellers of a financial asset would have to spend to try or otherwise find each other.



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Questions and Answers


Financial Markets - Questions
1.

What is a Treasury Bill?


Answer
2.

What are the functions of a Stock Exchange?


Answer
3.

What are the objectives of the SEBI?


Answer
4.

State the objectives of the NSE.


Answer
5.

What is the OTCEI?


Answer
6.

Explain the various money Market Instruments.


Answer
7.

Explain the various segments of NSE.


Answer
8.

‘R’ Limited is a real estate company which was formed in 1950. In about 56 years of its existence the company has managed to carve out a niche for itself in this sector. Lately, this sector is witnessing a boom due to the fact, that the Indian economy is on the rise. The incomes of middle class are rising. More people can afford to buy homes for themselves due lo easy availability of loans and accompanying tax concessions.
To expand its business in India and abroad the company is weight various options to raise money through equity offerings in India. Whether to tap equity or debt, market whether to raise money from domestic market or international market or combination of both? When their to raise the necessary finance from money market or capital market. It is also planning to list itself in New York Stock Exchange to raise money through ADR’s. To make its offerings attractive it is planning to offer host of financial plans products to its stakeholders and investors and also expand it’s listing at NSE after complying with the regulations of SEBI.

1. What benefits will the company derive from listing at NSE?


Answer
9.

What are the regulations of SEBI that the company must comply with?


Answer
10.

What do you mean by a stock index? How is it calculated?


Answer
11.

What conclusions can you draw from the various movements of NSE stock indices?


Answer
12.

What relationship do you see between the movement of indices in world markets and NSE indices?


Answer
13.

Give details of all the indices mentioned above, you can find information on the web or business magazines.


Answer
14.

“Money Market is essentially a Market for short term funds.” Discuss.


Answer
15.

Distinguish between Capital Market and Money Market.


Answer
16.

Explain the Capital Market reforms in India.


Answer
17.

Explain the objectives and functions of SEBI.


Answer
18.

How does the SEBI exercise control over ‘R’ Limited in the interest of investors?


Answer
19.

What factors affect the movement of stock indices? Elaborate on the nature of these factors.


Answer
20.

What are the functions of a Financial Market?


Answer
21.

What are the methods of floatation in Primary Market?


Answer
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