6F) Capital Market, Money Market and FDI (Prelims PYQs)

Last Updated on November 5, 2025 by Admin

2025 Prelims PYQs

1] With reference to investments, consider the following: [2025/A-1]

I. Bonds
II. Hedge Funds
III. Stocks
IV. Venture Capital
How many of the above are treated as Alternative Investment Funds?

a) Only one
b) Only two
c) Only three
d) All the four

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Ans: b) Only two

2] Consider the following statements: [2025/A-4]

I. The Reserve Bank of India mandates all the listed companies in India to submit a Business Responsibility and Sustainability Report (BRSR).
II. In India, a company submitting a BRSR makes disclosures in the report that are largely non-financial in nature.
Which of the statements given above is/are correct?

a) I only
b) II only
c) Both I and II
d) Neither I nor II

Show Answer

Ans: b) II only

3] Consider the following statements: [2025/A-7]

Statement I: As regards returns from an investment in a company, generally, bondholders are considered to be relatively at lower risk than stockholders.
Statement II: Bondholders are lenders to a company whereas stockholders are its owners.
Statement III: For repayment purpose, bondholders are prioritized over stockholders by a company.
Which one of the following is correct in respect of the above statements?

a) Both Statement II and Statement III are correct and both of them explain Statement I
b) Both Statement I and Statement II are correct and Statement I explains Statement II
c) Only one of the Statements II and III is correct and that explains Statement I
d) Neither Statement II nor Statement III is correct

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Ans: a) Both Statement II and Statement III are correct and both of them explain Statement I

4] Consider the following statements: [2025/A-8]

I. India accounts for a very large portion of all equity option contracts traded globally thus exhibiting a great boom.
II. India’s stock market has grown rapidly in the recent past even overtaking Hong Kong’s at some point of time.
III. There is no regulatory body either to warn the small investors about the risks of options trading or to act on unregistered financial advisors in this regard.
Which of the statements given above are correct?

a) I and II only
b) II and III only
c) I and III only
d) I, II and III

Show Answer

Ans: a) I and II only

2024 Prelims PYQs

1] With reference to the Indian economy, “Collateral Borrowing and Lending Obligations” are the instruments of: [2024]

a) Bond market
b) Forex market
c) Money market
d) Stock market

Show Answer

Ans: c) Money market

2] Consider the following statements: [2024]

1. In India, Non-Banking Financial Companies can access the Liquidity Adjustment Facility window of the Reserve Bank of India.
2. In India, Foreign Institutional Investors can hold the Government Securities (G-Secs).
3. In India, Stock Exchanges can offer separate trading platforms for debts.

Which of the statements given above is/are correct?
a) 1 and 2 only
b) 3 only
c) 1, 2 and 3 
d) 2 and 3 only

Show Answer

Ans: c) 1, 2 and 3 only

3] In India, which of the following can trade in Corporate Bonds and Government Securities? [2024]

1. Insurance Companies
2. Pension Funds
3. Retail Investors

Select the correct answer using the code given below:
a) 1 and 2 only
b) 2 and 3 only
c) 1 and 3 only
d) 1,2 and 3

Show Answer

Ans: d) 1,2 and 3

4] Consider the following: [2024]

1. Exchange-Traded Funds (ETF)
2. Motor vehicles
3. Currency swap

Which of the above is/are considered financial instruments?
a) 1 only
b) 2 and 3 only
c) 1,2 and 3
d) 1 and 3 only

Show Answer

Ans: d) 1 and 3 only

2023 Prelims PYQs

1] Consider the following markets : [2023]

1. Government Bond Market
2. Call Money Market
3. Treasury Bill Market
4. Stock Market

How many of the above are included in capital markets?
a) Only one                       b) Only two
c) Only three                     d) All four

Show Answer

Ans: b) Only two

2] In the context of finance, the term ‘beta’ refers to: [2023]

a) The process of simultaneous buying and selling of an asset from different platforms
b) An investment strategy of a portfolio manager to balance risk versus reward
c) A type of systemic risk that arises where perfect hedging is not possible
d) A numeric value that measures the fluctuations of a stock to changes in the overall stock market

Show Answer

Ans: d) A numeric value that measures the fluctuations of a stock to changes in the overall stock market

2022 Prelims PYQs

1] With reference to the Indian economy, what are the advantages of ‘Inflation-Indexed Bonds (IIBs)? [2022]

1. Government can reduce the coupon rates on its borrowing by way of IIBs
2. IIBs provide protection to the investors from uncertainty regarding inflation.
3. The interest received as well as capital gains on IIBs are not taxable.
Which of the statements given above are correct?

a) 1 and 2 only
b) 2 and 3 only
c) 1 and 3 only
d) 1, 2 and 3

Show Answer

Ans: a) 1 and 2 only

2] Which one of the following situations best reflects “Indirect Transfers” often talked about in the media recently with reference to India? [2022]

a) An Indian company investing in a foreign enterprise and paying taxes to the foreign country on the profits arising out of its investment
b) A foreign company investing in India and paying taxes to the country of its base on the profits arising out of its investment
c) An Indian company purchases tangible assets in a foreign country and sells such assets after their value increases and transfers the proceeds to India
d) A foreign company transfers shares and such shares derive their substantial value from assets located in India

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Ans: d) A foreign company transfers shares and such shares derive their substantial value from assets located in India

3] With reference to Convertible Bonds, consider the following statements: [2022]

1. As there is an option to exchange the bond for equity, Convertible Bonds pay a lower rate of interest.
2. The option to convert to equity affords the bondholder a degree of indexation to rising consumer prices.
Which of the statements given above is/are correct?

a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2

Show Answer

Ans: c) Both 1 and 2

2021 Prelims PYQs

1] Indian Government Bond Yields are influenced by which of the following? [2021]

1) Actions of the United States Federal Reserve
2) Actions of the Reserve Bank of India
3) Inflation and short-term interest rates
Select the correct answer using the code given below.

a) 1 and 2 only
b) 2 only
c) 3 only
d) 1, 2 and 3

Show Answer

Ans: d) 1, 2 and 3

2] Consider the following: [2021]

1) Foreign currency convertible bonds.
2) Foreign institutional investment with certain conditions
3) Global depository receipts
4) Non-resident external deposits
Which of the above can be included in Foreign Direct Investments?

a) 1, 2 and 3
b) 3 only
c) 2 and 4
d) 1 and 4

Show Answer

Ans: a) 1, 2 and 3

3] With reference to India, consider the following statements: [2021]

1) Retail investors through demat accounts can invest in ‘Treasury Bills’ and ‘Government of India Debt Bonds’ in the primary market.
2) The ‘Negotiated Dealing System-Order Matching’ is a government securities trading platform of the Reserve Bank of India.
3) The ‘Central Depository Services Ltd’. is jointly promoted by the Reserved Bank of India and the Bombay Stock Exchange.
Which of the statements given above is/are correct?

a) 1 only
b) 1 and 2 only
c) 3 only
d) 2 and 3 only

Show Answer

Ans: b) 1 and 2 only

2020 Prelims PYQs

1] With reference to the Indian economy, consider the following statements: [2020]

1. ‘Commercial Paper’ is a short-term unsecured promissory note.
2. ‘Certificate of Deposit’ is a long-term instrument issued by the Reserve Bank of India to a corporation.
3. ‘Call Money’ is a short-term finance used for interbank transactions.
4. ‘Zero-Coupon Bonds’ are the interest bearing short-term bonds issued by the Scheduled Commercial Banks to corporations.
Which of the statements given above is/are correct?

a) 1 and 2 only
b) 4 only
c) 1 and 3 only
d) 2, 3 and 4 only

Show Answer

Ans: c) 1 and 3 only

2] With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic? [2020]

a) It is the investment through capital instruments essentially in a listed company
b) It is a largely non-debt creating capital flow
c) It is the investment which involves debt-servicing
d) It is the investment made by foreign institutional investors in the Government securities

Show Answer

Ans: b) It is a largely non-debt creating capital flow

2019 Prelims PYQs

1] Which of the following is issued by registered foreign portfolio investors to overseas investors who want to be part of the Indian stock market without registering themselves directly? [2019]

a) Certificate of Deposit
b) Commercial Paper
c) Promissory Note
d) Participatory Note

Show Answer

Ans: d) Participatory Note

2018 Prelims PYQs

1] Consider the following statements: [2018]

1. The Reserve Bank of India manages and services Government of India Securities but not any State Government Securities.
2. Treasury bills are issued by the Government of India and there are no treasury bills issued by the State Governments.
3. Treasury bills offers are issued at a discount from the par value.
Which of the statements given above is/are correct?

a) 1 and 2 only
b) 3 only
c) 2 and 3 only
d) 1, 2 and 3

Show Answer

Ans: c) 2 and 3 only

2016 Prelims PYQs

1] What is/are the purpose/purposes of Government’s ‘Sovereign Gold Bond Scheme’ and ‘Gold Monetization Scheme’? [2016]

1. To bring the idle gold lying with Indian households into the economy
2. To promote FDI in the gold and jewellery sector
3. To reduce India’s dependence on gold imports
Select the correct answer using the code given below.

a) 1 only
b) 2 and 3 only
c) 1 and 3 only
d) 1, 2 and 3

Show Answer

Ans: c) 1 and 3 only

2] With reference to `IFC Masala Bonds’, sometimes seen in the news, which of the statements given below is/are correct? [2016]

1. The International Finance Corporation, which offers these bonds, is an arm of the World Bank.
2. They are the rupee-denominated bonds and are a source of debt financing for the public and private sector.
Select the correct answer using the code given below.

a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2

Show Answer

Ans: c) Both 1 and 2

2014 Prelims PYQs

1] What does venture capital mean? [2014]

a) A short-term capital provided to industries
b) A long-term start-up capital provided to new entrepreneurs
c) Funds provided to industries at times of incurring losses
d) Funds provided for replacement and renovation of industries

Show Answer

Ans: b) A long-term start-up capital provided to new entrepreneurs

2012 Prelims PYQs

1] Which of the following would include Foreign Direct Investment in India? [2012]

1. Subsidiaries of foreign companies in India
2. Majority foreign equity holding in Indian companies
3. Companies exclusively financed by foreign companies
4. Portfolio investment

Select the correct answer using the codes given below:
a) 1,2, 3 & 4                        b) 2 & 4 Only
c) 1 & 3 Only                      d) 1,2 & 3 Only

Show Answer

Ans: d) 1,2 & 3 Only

2011 Prelims PYQs

1] Both foreign direct investment (HDI) and foreign institutional investor (FII) are related to investment in a country. Which one of the following statements best represents an important difference between the two? [2011]

a) FII helps bring better management skills and technology. While FDM only brings in capital.
b) FII helps in increasing capital  availability in  general, while FDI only targets specific.
c) FDI flows only into the secondary market, in general, while FDI only targets specific sectors.
d) FII is considered  to be more  stable than FDI.

Show Answer

Ans: b) FII helps in increasing capital  availability in  general, while FDI only targets specific.

2010-1995 Prelims PYQs

1] In the parlance of financial investments, the term ‘bear’ denotes: [2010]

a) An investor who feels that the price of a particular security is going to fall.
b) An investor who expects the price of particular share to rise.
c) A shareholders or a bondholder who has an interest in a company.
d) Any lender whether by making a loan or buying a bond.

Show Answer

Ans: a) An investor who feels that the price of a particular security is going to fall.

2] A great deal of Foreign Direct Investment ( FDI ) to India comes from Mauritius than from many major and mature economics like UK and France. Why? [2010]

a) India has preference for certain countries as regards receiving FDI.
b) India has doubled taxation avoidance agreement with Mauritius.
c) Most citizens of Mauritius have ethnic identity with India and so they feel secure to invest India.
d) Impending dangers of global climate change prompt Mauritius to make huge investment in India.

Show Answer

Ans: b) India has doubled taxation avoidance agreement with Mauritius.

3] Participatory Notes (PNs) are associated with which one of the following? [2007]

a) Consolidated Fund of India
b) Foreign Institutional Investors
c) United Nations Development Programme
d) Kyoto Protocol

Show Answer

Ans: b) Foreign Institutional Investors

4] What is IndoNext which was launched in January, 2005? [2006]

a) A new scheme to promote Indian tourism
b) A new scheme to promote export of Indian handicrafts
c) An association of the Non’Resident Indians to organize Pravasi Bhartiya Divas every year in India
d) An alternative trading platform being promoted by the Bombay Stock Exchange and Regional Stock Exchanges.

Show Answer

Ans: d) An alternative trading platform being promoted by the Bombay Stock Exchange and Regional Stock Exchanges.

5] Consider the following statements: [2005]

1. Sensex is based on 50 of the most important stocks available on the Bombay Stock Exchange (BSE)
2. For calculating the Sensex, all the Sensex stocks are assigned proportional weightage.
3. New York Stock Exchange is the oldest stock exchange in the world.

Which of the statements is/are correct?
a) 2 only              b) 1 and 3
c) 2 and 3            d) None

Show Answer

Ans: a) 2 only

6] In the last one decade, which one among the following sectors has attracted the highest Foreign Direct Investment inflows into India? [2004]

a) Chemicals other than fertilisers
b) Services sector
c) Food processing
d) Telecommunication

Show Answer

Ans: d) Telecommunication

7] Debenture holder of a company are its: [2003]

a) Shareholders              
b) Creditors
c) Debtors                         
d) Directors

Show Answer

Ans: b) Creditors

8] With reference to Government of India’s decisions regarding Foreign Direct Investment (FDI) during the year 2001- 02, consider the following statements: [2003]

1. Out of the 100% FDI allowed by India in tea sector, the foreign firm would have to disinvest 33% of the equity in favour of an Indian partner within four years.
2. Regarding the FDI in print media in India, the single largest Indian shareholder should have a holding higher than 26%

Which of these statements is/are correct?
a) Only 1                           
b) Only 2
c) Both 1 and 2                
d) Neither 1 nor 2

Show Answer

Ans: c) Both 1 and 2 

9] Among the following major stock exchanges of India, the exchange which recorded highest turnover during the year 2000-01 is: [2002]

a) Bombay Stock Exchange
b) Calcutta Stock Exchange
c) Delhi Stock Exchange
d) National Stock Exchange

Show Answer

Ans: a) Bombay Stock Exchange

10] The largest share of Foreign Direct Investment (1997-2000) went to: [2001]

a) Food and food’product sector
b) Engineering sector
c) Electronics and electric equipment sector
d) Service sector

Show Answer

Ans: b) Engineering sector

11] Gilt-edged market means: [2000]

a) Bullion market
b) Market of Government securities
c) Market of guns
d) Market of pure metals

Show Answer

Ans: b) Market of Government securities

12] Resurgent India Bonds were issued in US Dollar, Pound Sterling and: [2000]

a) Japanese Yen              
b) Deutsche Mark
c) Euro                               
d) French Franc

Show Answer

Ans: b) Deutsche Mark

13] The upper part of the given graph is a hypothetical movement in the BSE Sensex over a few months and the lower part is the fluctuation in the average value of automobile shares in the same period (actual values not given). Which one of the following inferences can be drawn from the graphs? [2000]

a) The automobile share market has been as unstable as BSE Sensex in that period: []
b) There has been a major political change in June/July
c) Automobile shares have shown a steady improvement in price, unaffected by large fluctuations in BSE Sensex
d) None of the above

Show Answer

Ans: c) Automobile shares have shown a steady improvement in price, unaffected by large fluctuations in BSE Sensex

14] A rise in ‘SENSEX’ means: [2000]

a) A rise in prices of shares of all companies registered with Bombay Stock Exchange
b) A rise in prices of shares of all companies registered with National Stock Exchange
c) An overall rise in prices of shares of group of companies registered with Bombay Stock Exchange
d) A rise in prices of shares of all companies belonging to a group of companies registered with Bombay Stock Exchange

Show Answer

Ans: c) An overall rise in prices of shares of group of companies registered with Bombay Stock Exchange

15] The behaviour of a fictitious stock market index (comprising a weighted average of the market prices of a selected list of companies including some multinational corporations (MNC’s) over a 15 day period is shown in the graph. The behaviour of the MNC’s in the same period is also shown in the second graph. Which one of the following is a valid conclusion? [1997]

a) MNC’s fell steeper in the period depicted
b) Share prices of every non-MNC company soared by over 5% on the 12th day
c) Government announced a policy disfavouring MNC’s on the 11th day
d) Whatever be the reason favouring market revival on the 12th day, it appears to be relevant only to non-MNC companies

Show Answer

Ans: d) Whatever be the reason favouring market revival on the 12th day, it appears to be relevant only to non-MNC companies

16] To prevent recurrence of scams in Indian Capital Market, the Government of India has assigned regulatory powers to: [1995]

a) SEBI                 b) RBI
c) SBI                   d) SBI

Show Answer

Ans: a) SEBI 

17] Which one of the following is the largest mutual fund organisation in India? [1995]

a) SBI Mutual Fund
b) GIC Mutual Fund
c) Industrial Bank Mutual Fund
d) Unit Trust of India

Show Answer

Ans: d) Unit Trust of India