JKBOSE 10th Class Social Science Solutions chapter – 3 Financial Instruments used in Financial Market Operations

04/14/2023 Ajit kumar 58 Views 0 Comments

Jammu & Kashmir State Board JKBOSE 10th Class Social Science Solutions

INTRODUCTION TO THE CHAPTER

Shares. A share is an indivisible unit of capital expressing the ownership relationship between the company and the shareholders.
Shareholer. The person who holds the share is known as shareholders.
Debenture. It is a debt security under which the issues owes the debenture holder a debt and is obliged to pay them pre-determined rate of interest.
Stock Exchange. It is a market where financial instruments are traded.
BSE. Bombay Stock Exchange.
NSE. National Stock Exchange.
SENSEX. It is a free float market weighted stock market index of 30 well established and financially sound companies listed in BSE.
NIFTY. It is an index in India consisting of 50 stocks representing 23 Industry sectors.
SEBI. It is the regulator for the securities market in India.
SEBI. Securities and Exchange Board of India.

J&K class 10th Social Science Financial Instruments used in Financial Market Operations Textbook Questions and Answers

Very Short Answer Type Questions

Q. 1. What do you mean by shares ?

Ans. The capital of a company is divided into small units called shares.

Q. 2. Define shareholder.

Ans. The person who holds the shares is known as shareholder.

Q. 3. State the types of shares.

Ans. (i) Preference shares

(ii) Equity shares.

Q. 4. What is joint stock company

Ans. Joint stock company is a company whose stock is owned jointly by the shareholders.

Q. 5. Define Debenture.

Ans. It is a long term security yielding a fixed rate of interest, issued by a company and secured against assets.

Q. 6. What stock exchange ?

Ans. It is a market where financial instruments are traded.

Q. 7. State the full form of BSE and NSE.

Ans. BSE. Bombay Stock Exchange

NSE. National Stock Exchange.

Q. 8. What is SENSEX?

Ans. It is a free float market weighted stock market index of 30 well established and financially sound companies listed in BSE.

Q. 9. What is NIFTY?

Ans. It is an index in India consisting of 50 stocks representing 23 industry sectors.

Q. 10. What is SEBI?

Ans. It is the regulator for the securities market in India.

J&K class 10th Social Science Financial Instruments used in Financial Market Operations Important Questions and Answers

Objective Type Questions

Multiple Choice Questions

1. When was SEBI Constituted ?

(A) April, 1988

(B) March, 1982

(D) December, 1974.

Ans. (A) April 1988.

2. Who is the current chairman of the SEBI ?

(A) U.K. Sinha

(B) Ajay Tyagi

(D) A.K. Malhur.

Ans. (B) Ajay Tyagi.

3. Which of the following words does not belong to the stock exchange ?

(A) NAV

(B) NSE

(D) KPO.

Ans. (D) KPO.

4. Where is the headquarter of the SEBI ?

(A) Delhi

(B) Bengaluru

(D) Mumbai.

Ans. (D) Mumbai.

5. How many companies are included in the SENSEX ?

(A) 30

(B) 50

(D) 25

Ans. (A) 30.

6. Which of the following is responsible for the fluctuations in the Sensex ?

(A) Rain

(B) Monetary Policy

(D) All of the above.

Ans. (D) All of the above.

7. When was NIFTY established ?

(A) 1952

(B) 1965

(D) 1996.

Ans. (D) 1996.

8. KOSPI is the index of which country?

(A) Japan

(B) South Korea

(D) France.

Ans. (B) South Korea.

9. Which of the following is not a type of a share ?

(A) Preference Share

(B) Equity Share

(D) None of the above.

Ans. (C) Mutual Share.

10. Which type of the shareholder is owner of the company?

(A) Preference Shareholder

(B) Equity Shareholder

(D) None of the above.

Ans. (B) Equity Shareholder.

Fill in the blanks

1. The capital of a company is divided into small units called ……….

Ans. Share

2. ……….. is a market where financial instruments are traded.

Ans. Stock exchange

3. SENSEX is a …………… market.

Ans. free float

4. NIFTY was established in …………

Ans. 1996

5. SEBI became statutory body in ……………

Ans. 1992

True or False

1. The person who holds the shares is known as shareholder.

Ans. True

2. Stock exchange provides trading facilities to investors through shareholders.

Ans. False

3. 30 sound companies are included in the Sensex.

Ans. True

4. SCORES means SEBI complaint redress system.

Ans. True

5. Credit Rating agencies in India regulates by NIFTY.

Ans. False

Short Answer Type Questions

Q. 1. What do you understand by Shares ?

Ans. The capital of a company is divided into small units called ‘Shares’. The person who holds the shares is known as Shareholder. Share is a unit into which the whole capital of a company is divided. Shares are unit of ownership interest in a Joint Stock Company or financial asset that provide for an equal distribution of profit if declared in annual general meeting in the form of dividend to shareholders.

Q. 2. What is Stock Exchange ?

Ans. Stock Exchange is a market where financial instruments are traded. Stock exchange provides trading facilities to investors through stock brokers. Securities traded in stock exchange include: Shares issued by companies, debentures, financial derivatives, bonds etc. Bombay Stock Exchange and National Stock Exchange are two main stock exchange in India.

Q. 3. What do you mean by SENSEX ?

Ans. It is a free float market-weighted stock market index of 30 well established and financially sound companies listed on Bombay Stock Exchange. The 30 component companies which are some of the largest and most actively traded stocks, are representative of various industrial sectors of the Indian economy.

Q. 4. State the difference between shares and debentures.

Ans. Share is the capital of the company but debenture is the debt of the company. The shares represent ownership of the shareholders in the company. On the other hand, debentures represent indebtness of the company. The income earned on shares is the dividend, but the income earned on debentures is interest.

Q. 5. State the functions of Stock Exchange.

Ans. Following are the main functions :

It meeting places for sellers and buyer of securities.
It increases the marketability and liquidity of securities.
It contributes to stability of prices of securities.
It helps the investors to know the worth of their holdings.
It helps companies and government to raise funds from their investors.

Q. 6. State the advantages of Stock Exchange.

Ans. Following are the main advantages :

It giving access to new capital to develop the business.
It allowing you to do business. e.g. acquistions by using quoted shares as currency.
It creating a market for the company’s shares.
It increasing your public profile, and provides reassurance to your customers and suppliers.

Q. 7. What is SEBI ?

Ans. The Security and Exchange Board of India (SEBI) is the regulator for the securities market in India. It was established in 1988 and given statutory powers on 30 January 1992 through the SEBI ACT, 1992.

Long Answer Type Questions

Q. 1. What do you mean by Shares ? What are the types of Shares ?

Ans. It refers to that portion of total capital of a company which is divided into small equal parts and that each part is known as share.

Types of Shares :

Shares are of two types :

Preference Shares
Equity Shares.

(i) Preference Shares. Preference shares are those shares which carry two special rights :

Dividend at a fixed rate is payable on these shares before any dividend is paid on equity shares.
At the time of winding up of a company, Capital is repaid to the preference shareholders prior to the return of equity capital.

(ii) Equity Shares. Equity shares are those shares which are not preference shares. The holders of these shares are the real owner of the company. They have a voting rights in the meeting of holders of the company.

Q. 2. What do you mean by SEBI ? Explain its objectives.

Ans. The Securities and Exchange Board of India (SEBI) is the regulator for the securities market in India. It was established in 1988 and given statutory power on 30th Jan, 1992 through the SEBI Act, 1992.

Objectives of SEBI :

Regulations of Stock Exchange. The first objective of SEBI is to regulate Stock exchange so that efficient services may be provided to all the parties operating there.
Protection to the Investors. SEBI helps to protect the interest of the investors, which means protecting them from the wrong information given by the companies in their prospectus.
Control over Brokers. It is important to keep an eye on the activities of the brokers and other middlemen in order to control the captial market, to have a control over them, it was necessary to establish the SEBI.

Q. 3. What do you mean by Stock Exchange ? Explain any three functions of Stock Exchange.

Ans. Stock Exchange means an organised market where securities issued by Companies, government. and semi-government organisations are sold and purchased. These securities include shares, debentures, bonds etc.

Functions of Stock Exchange :

Providing Liquidity and Marketability to Existing Securities. Stock exchange is a market place where previously issued securities are traded. Various types of securities are traded here on regular basis. Availabilitiy of ready market for sale and purchase of securities increases their marketability and enhance liquidity.
Pricing of Security. In this type of market prices of securities are determined on regular basis, because a Stock exchange provides platform to deal in securities.
Safety of Transactions. In stock market only the listed securities are traded and stock exchange authorities include the companies names in the trade list only after verifying the soundness of company. The companies which are listed they also have to operate with in the strict rules and regulations. This ensures safety of dealing through stock exchange.

Q. 4. Explain any five terminologies which are used in Stock exchange market.

Ans. The main terminologies of Stock Exchange are as follows:

Badla or Contango. As a result of decline in the price of securities, sometimes the date of transactions has to be postponded by the bull and for this arrangement the financer has to be paid interest. This interest is known as Contango.
Blue Chip Share. Shares of a reputed profit making company is known as Blue Chip Shares.
Broker. The members of Stock Exchange who sells and purchases securities on the behalf of the non-members is known as broker.
Euro Bond. Those bonds which are issued outside the country is known as Euro Bond.
SENSEX. The index which is based on shares of 30 companies of Bombay stock Exchange and shows the increase and decrease in market price of shares is known as SENSEX.

Q. 5. What is the difference between preference shares and equity shares ?

Ans.

Sl.N.	Basis of Difference	Equity Shares	Preference Shares
1.	Rate of dividend	Fluctuating	Fixed
2.	Voting rights	Equity shares carry voting rights	Preference shares do not carry voting rights.
3.	Payment of dividend	The dividend is paid after the payment of all liabilities.	Priority in payment of dividend over equity shareholders.
4.	Redemption	No	Yes
5.	Convertibility	Equity shares can never be converted	Preference shares can be converted into equity shares.
6.	Repayment of Capital	In the event of the winding up of a company, equity shares are repaid at the end	In the event of winding up of a company, preference shares are repaid before equity shares.

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JKBOSE 10th Class Social Science Solutions chapter – 3 Financial Instruments used in Financial Market Operations