Securities Market Foundation Free Demo Test 2

If the PBV ratio is “less than one,” it means the market price is lower than the book value, which could indicate that the stock is undervalued.

Primary dealers are financial institutions that have a special relationship with the Reserve Bank of India (RBI) and are involved in the government securities market. They play a crucial role in underwriting government securities, and their obligations in this regard are defined in the agreement with the RBI. This agreement establishes the terms and conditions of their underwriting responsibilities.

Floating rate bonds are also known as variable rate bonds and adjustable rate bonds. Unlike fixed-rate bonds, the interest rate on floating rate bonds is not fixed throughout the bond’s term. Instead, it fluctuates periodically based on changes in an underlying benchmark interest rate or reference rate. This characteristic makes the interest payments on floating rate bonds variable, hence the alternate names “variable rate bonds” and adjustable rate bonds.

Risk refers to the possibility that the expected returns may not materialize. In financial contexts, risk is the uncertainty or variability associated with the potential outcomes of an investment or decision. It encompasses the chance of financial loss or the deviation of actual returns from expected returns. Understanding and managing risk are crucial aspects of financial decision-making.

The Negotiated Dealing System-Order Matching system (NDS-OM) is an anonymous, electronic, screen-based, order-driven system for the trading of Government Securities (G-secs). It is owned and operated by the Reserve Bank of India (RBI). The NDS-OM facilitates the trading of G-secs in the secondary market, providing a platform for market participants to submit and match buy and sell orders for government bonds.