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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

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.

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.

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

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.

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

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

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

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

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

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

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

11] Gilt-edged market means: [2000]

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

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

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

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

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

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

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

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

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