Securities Market Foundation Free Demo Test 5

Explanation:

Equity index futures and equity index options are among the largest traded products in derivative markets worldwide. These instruments are popular because they allow investors to gain exposure to an entire stock market index or a specific sector without having to buy individual stocks. They offer opportunities for hedging, speculation, and portfolio diversification, making them highly liquid and actively traded in derivative markets.

Explanation:

An example of a derivative contract is a “forward.” A forward contract is a financial derivative that represents an agreement between two parties to buy or sell an asset at a specified future date for a price agreed upon today. The underlying asset can vary and may include commodities, currencies, stocks, or bonds.

Explanation:

Constituents in a public issue typically include registrar and transfer agents, bankers, and brokers to the issue. These entities play different roles in the process of a public issue. Registrar and transfer agents handle the administrative tasks related to maintaining records of shareholders and facilitating the transfer of shares. Bankers manage the financial aspects of the issue, including underwriting and distribution of shares. Brokers to the issue assist in marketing and selling the shares to investors.

Explanation:

A mutual fund that collects money from investors and invests in the market is an example of an “Intermediary.” Mutual funds act as intermediaries or intermediaries between investors and the securities market. They pool funds from individual investors and use those funds to invest in a diversified portfolio of stocks, bonds, or other securities.

Explanation:

An open-ended short-term debt scheme investing in debt and money market instruments is known as a “Short Duration Fund.” Short Duration Funds are a category of mutual funds that typically invest in a portfolio of debt securities and money market instruments with a maturity duration ranging from one to three years.

Explanation:

The trading “lot” depends on the value of the underlying asset. In financial markets, a lot refers to a standardized quantity of a financial instrument that is traded as a unit. The size of a lot can vary depending on the asset class and market conventions.

For example:

• In the stock market, a lot may represent a specific number of shares, such as 100 shares.
• In the futures market, a lot represents a standardized contract size for the underlying commodity or financial instrument.
• In the forex market, a lot size represents a specific quantity of a currency pair.

The lot size is an important factor in determining the quantity of the underlying asset that is bought or sold in a single transaction. It plays a crucial role in risk management and position sizing for traders and investors.

Explanation:

Explanation:

A good till cancelled (GTC) order remains in the system until it is executed or cancelled by the trader. This type of order instructs the broker to keep the order active until either it is filled or the trader decides to cancel it. GTC orders are commonly used by investors who want to execute a trade at a specific price but are willing to wait for the market conditions to meet their criteria.

Explanation:

According to SEBI (Securities and Exchange Board of India) Regulations, 2008, the intermediaries of securities markets include bankers to an issue, trustees of trust deeds, and credit rating agencies. This means that all the options mentioned (a) Bankers to an issue, (b) Trustees of trust deeds, and (c) Credit rating agencies are considered intermediaries according to the regulations. Therefore, option (d) “All the above” is the correct answer. These intermediaries play crucial roles in facilitating various aspects of securities transactions and ensuring market integrity.

Explanation:

SEBI (Securities and Exchange Board of India) regulations allow an issuer to decide the price at which the shares will be allotted to investors in a preferential issue.

In a preferential issue, the issuer issues new shares to a select group of investors, such as existing shareholders or strategic investors, on a preferential basis. The price at which these shares are allotted is determined by the issuer, often based on negotiations with the investors or as per the valuation norms specified by SEBI.