Securities Market Foundation Free Demo Test 1

Explanation:

In the secondary market, investors can enter or exit any listed security by conducting transactions. This market involves the buying and selling of previously issued securities, such as stocks and bonds, among investors. It provides liquidity to investors by allowing them to buy and sell securities easily.

Explanation:

The intrinsic value of a stock represents its true worth based on fundamental factors such as earnings, dividends, growth potential, and risk. It serves as the anchor for stock prices because investors aim to buy stocks when they are trading below their intrinsic value and sell them when they are trading above it. Therefore, stock prices tend to gravitate towards their intrinsic value over the long term.

Explanation:

The Reserve Bank of India (RBI) typically sells securities to investors through periodic auctions. In these auctions, the RBI offers government securities to investors, who bid for them based on their desired yield or price. The securities are then allocated to the highest bidders. This process helps the RBI manage liquidity in the financial system and implement its monetary policy objectives.

Explanation:

In the sale of an option in securities, the seller (also known as the writer) is responsible for receiving the option premium from the purchaser (the buyer of the option). The option premium is the price paid by the purchaser to acquire the option contract. The seller receives this premium as compensation for taking on the obligation associated with the option contract.

Explanation:

The stock market is also referred to as the secondary market. In the secondary market, existing securities are bought and sold among investors. This is distinct from the primary market (option b), where new securities are issued for the first time. Options c and d, the money market and currency market, represent different financial markets with distinct characteristics and instruments.

Explanation:

The company appoints a credit rating agency to assess its ability to service a debt security, including evaluating its capacity to meet interest and principal repayment obligations. Credit rating agencies analyze the financial health and creditworthiness of companies, assigning credit ratings that provide investors with an indication of the risk associated with investing in the company’s debt securities.

Explanation:

In the context of a repurchase agreement (repo), when it is recorded in the books of the borrower, it is termed as a reverse repo in the books of the lender. In a reverse repo, the lender essentially acts as the buyer of securities.

Explanation:

The term “securities” is defined in Section 2 (h) of the Securities Contracts (Regulation) Act, 1956. This section provides the legal definition for the term within the context of the act.

Explanation:

The Insurance Regulatory and Development Authority of India (IRDAI) possesses the authority to register new applicants and alter, suspend, or revoke the registrations of existing insurers or re-insurers. It is the regulatory body overseeing the insurance sector in India, responsible for ensuring compliance with regulations, promoting fair competition, and protecting the interests of policyholders.

Explanation:

According to SEBI rules, investors are required to pay 25 percent of the amount of consideration upfront during warrant issues. Warrants represent a type of financial instrument that gives the holder the right, but not the obligation, to buy or sell the underlying security at a specified price before the expiration date.