11. The price of underlying asset is added into intrinsic value of option to calculate-
1. forward price of option
2. exercise price of option
3. book value of option
4. spot price of option
5. Market value of option
Option “2” is correct. The intrinsic value of an option represents the current value of the option, or in other words how much in the money it is. For in the money options, intrinsic value is calculated as the difference of the current price of the underlying asset and the strike price of the option.
12. The type of exchange members who only buy and sell for their personal account are classified as-
Option “2” is correct. Type of exchange members who only buy and sell for their personal account are classified as professional traders. A professional trader is a person who is paid to undertake a specialized set of tasks and to complete them for a fee.
13. The Securities and Exchange Board of India was not entrusted with the function of-
1. Investor protection
2. Ensuring fair practices by companies
3. Promotion of efficient services by brokers
4. Improving the earning of equity holders
5. None of the above
Option “4” is correct. SEBI regulates the operations of depositories, participants, custodians of securities, foreign portfolio investors, and credit rating agencies. It prohibits insider trading, i.e. fraudulent and unfair trade practices related to the securities market. The SEBI Act of 1992 carries a list of such powers vested in the regulatory body. The functions of SEBI make it an issuer of securities, protector of investors and traders and a financial mediator.
14. An anchor investor is one of the following:
1. Non-qualified institutional buyer making application for value of INR 10 crore or more through book-building process
2. Qualified Institutional buyer making application for value of INR 10 crore or more through book-building process
3. Preferential Institutional Buyer making application for value of INR 10crore or more through book-building process
4. Preferential Institutional Buyer making application for value of INR 20 crore or more through book-building process
5. None of the above
Option “1” is correct. Qualified Institutional buyer making application for value of INR 10 crore or more through book-building process is an anchor investor. SEBI introduced the concept of anchor investors in public issues in 2009. This move was to impact pricing of IPOs. Anchor investors benefit IPOs as equity markets are volatile. Anchor investors attract investors to public offers before hitting capital markets to infuse confidence. Value and volume of anchor subscriptions are an indicator of the soundness of the firm’s offer. This also sets a benchmark and provides for guidelines for issue pricing and interest among QIBs.
15. SEBI has proposed a set of changes to relax rules and rename the institutional trading platform as what?
1. Innovators Growth Platform
2. High Tech Incubation & Other New Business Platform
3. High Tech Innovation& Other New Business Platform
4. High Tech Innovation & Other New Trading Platform
5. None of the above
Option “1” is correct. The Securities and Exchange Board of India made considerable changes for startup listing platform to enhance its appeal for new age firms going public in local markets. • Regulator indicated that based on feedback received from market participants, the decision has been taken to relax rules and rename the institutional trading platform as High Tech Start Up & Other New Business Platform now named as Innovators Growth platform. • The proposal has been to eliminate the rule which says no single shareholder shall own more than 25 percent after listing, which many promoters were not comfortable with and has increased the allocation of shares more for HNIs and corporates. • The hike in the limit on share allotment to individual institutional investors has gone up from 10 to 25 percent. • Regulator also proposed to permit market making compulsory for at least three years for IPO of less than INR 100 crore. • Regulator has also proposed lock in for pre-issue shares held by venture capitalists and employees under the ESOP scheme for six months following the IPO.
16. To regulate scam in Indian capital market, which of the following body has regulatory power:
1. SEBI
2. RBI
3. SBI
4. IRDA
5. None of these
Option “1” is correct. SEBI regulates the operations of depositories, participants, custodians of securities, foreign portfolio investors, and credit rating agencies. It prohibits insider trading, i.e. fraudulent and unfair trade practices related to the securities market.The SEBI Act of 1992 carries a list of such powers vested in the regulatory body. The functions of SEBI make it an issuer of securities, protector of investors and traders and a financial mediator.
17. The capital market deals in _________ securities such as equity shares and debentures-
(i) Short term
(ii) Medium term
(iii) Long term
1. Only (ii)
2. Only (i) & (ii)
3. Only (ii) & (iii)
4. Only (iii)
5. All (i), (ii) & (iii)
Option “3” is correct. The capital market deals in medium- and long-term securities such as equity shares and debentures.
18. Which of the following statements are Incorrect?
(i) Share capital issued by a company for the first time is known as venture capital.
(ii) All Venture Capital Funds in India are promoted by the Government.
(iii) In addition to capital, venture capitalists provide managerial and technical support also to the assisted firms.
(iv) Benefits from venture capital financing can be realised in long run only.
1. Only (i), (ii) and (iv)
2. Only (i) and (ii)
3. Only (ii), (iii) and (iv)
4. only (iii) and (iv)
5. All (i), (ii), (iii) and (iv)
Option “2” is correct. a) Venture capital (VC) is a form of private equity financing that is provided by venture capital firms or funds to startups, early-stage, and emerging companies that have been deemed to have high growth potential or which have demonstrated high growth (in terms of the number of employees, annual revenue, the scale of operations, etc.). Venture capital firms or funds invest in these early-stage companies in exchange for equity, or an ownership stake. Venture capitalists take on the risk of financing risky start-ups in the hopes that some of the firms they support will become successful. b) Venture Capital typically comes from institutional investors and high net worth individuals and is pooled together by dedicated investment firms. It is the money provided by an outside investor to finance a new, growing, or troubled business. c) Venture capitalist finances innovation and ideas, which have the potential for high growth but are unproven. This makes it a high risk, high return investment. In addition to finance, venture capitalists also provide value-added services and business and managerial support for realizing the venture’s net potential. d) Start-up companies with the potential to grow to need a certain amount of investment. Wealthy investors like to invest their capital in such businesses with a long-term growth perspective. This capital is known as venture capital and the investors are called venture capitalists. Venture capital financing is a long term investment. It generally takes a long period to encash the investment in securities made by the venture capitalists.
19. Which of these is NOT a part of capital receipt?
1. Recovery of loan
2. Disinvestment
3. Borrowing
4. Tax
5. All of the above
Option “4” is correct. · Capital receipts are the cash received from the sale of fixed assets, cash received from the sale of company shares, and cash received through the issue of a debt instrument, such as loans and bonds. · Capital receipts are government revenues that either (i) generate liabilities (e.g. borrowing) or (ii) reduce assets (e.g. disinvestment). · A capital receipt occurs when the government raises funds by incurring liability or selling its assets. · Revenue receipts are government receipts that do not (i) increase obligations or (ii) deplete assets. · These are tax revenues, interest, and dividends on government investments, cess, and other government receipts for services given.
20. Which is the panel appointed by the government to point out the differences between the FDI and FII?
1. Nachiket Mor committee
2. Usha Thorat Committee
3. Narsinham Committee
4. Arvind Mayaram Committee
5. B Sivaraman committee
In the year 2013, the government constituted a four-member committee under the Economic Affairs Secretary Arvind Mayaram, to clear the ambiguity between FDI and FII. Important committees in India
