Hridaan’s Edumax

S1 - 18, Gate 3, Dosti Shoppe

Imperia, Manpada Thane

Financial Markets
CLASS 12 - BUSINESS STUDIES

Time Allowed : 1 mins Maximum Marks : 310

Section A

1 Supriya’s grandmother [3]

who was unwell, called
her and gave her a gift
packet. Supriya opened
the packet and saw
many crumpled share
certificates inside. Her
grandmother told her
that they had been left
behind by her late
grandfather.As no
trading is now done in
physical form, Supriya
wants to know the
process by adopting
which she is in a
position to deal with
these certificates.

1. Identify and
state the
process.

2. Also, give two

reasons to
Supriya why
dealing with
shares in
physical form
has been
stopped.

2 Give the meaning of the [3]

following money
 market instruments

1. Commercial bill;
and

2. Certificate of
deposit.

3 With a view to [3]

encouraging its
employees, Shruti
Fashion Designers
Ltd. launched a
scheme. It was like this:
Any employee of the
company whose work
performance reaches
up to a given mark will
get free 10 equity
shares of the company.
On the other hand, that
employee of the
company whose work
performance is not up
to a given mark will get
10 equity shares of the
company at face value
(market value of
company’s shares is
much higher than the
face value). The
scheme was accepted
by the employees
gladly. They felt very
happy as they were
now participant in the
ownership of the
company. They
displayed better
performance than
before. Not only that,
many employees began
to take interest in
buying and selling of
shares of other
companies. The
 market, wherein they
used to buy and sell
shares, was doing the
job of creating liquidity
in the shares. The
attribute of creating
liquidity by this market
was very much liked by
the employees.

1. Identify the
above
mentioned
incentive
method.

2. Name the
market that
interested the
employees.

3. How does the

market,
identified these
points discussed
here, create
liquidity in the
shares?

4 What is a Treasury [3]

Bill?
5 Aekaa Limited is [3]
dealing in all types of
cosmetic products. It is
enjoying increased
demand for its product
during the last few
years. For the purpose
of expansion the
company needs ₹ 100
crores as additional
capital. The company
decides to raise funds
through equity shares.
Ved Kapoor, the
finance manager of the
 company
recommended that the
shares may be sold
through issuing houses
or brokers. Identify
and explain the method
recommended by Mr.
Kapoor through which
the company can raise
additional funds for
expansion purposes.
6 What are the functions [3]
of a stock exchange?
7 "Unicon Securities Pvt. [3]
Ltd" was established to
deal in securities. It
was registered as a
stock broker with
National Stock
Exchange (NSE) and
Bombay Stock
Exchange (BSE) to
trade in securities
listed at these
exchanges. It is also a
depository participant
with CDSL and NSDL.
In the first three years,
it developed its
business successfully.
After that the
composition of Board
of Directors changed.
Some customers
complained to the
customer care centre of
the company that
shares purchased by
them and for which the
payment has been duly
made, were not
transferred to their
D’mat Accounts by
"Unicon securities Pvt.
Ltd". The executive of
 customer care centre
promised the
aggrieved customers
that their shares will be
transferred to their
respective D’mat
Accounts very soon.
But the company
delayed the matter and
didn’t transfer the
shares of the
customers to their
D’mat Accounts. This
eroded investors
confidence and
multiplied their
grievances.

1. Identify the step

of trading
procedure in a
stock exchange
which has not
been followed
by "Unicon
Securities Pvt.
Ltd".

2. Name the Apex

statutory body
of capital
market to whom
customer can
complain to
redress their
grievances.

3. Define the term

money market
and mention it’s
features also

8 Mr. Gupta has been [3]

retired from the job
and has received a
sizeable amount as a
retirement benefit. He
 consults his friends and
family members about
the investment
opportunities. On their
advice, he decides to
invest₹ 20 lakh in the
securities provided.
These securities are
issued by the company
for the first time.
Which part of the
capital market Mr.
Gupta should
approach? Explain the
features of such a
market.
9 Define capital market. [3]
State the twoparts of
capital market.
10 Explain the concept of [3]
financial markets. State
two major segments of
financial markets.
11 Give one regulatory [3]
function of SEBI.
12 What is meant by [3]
primary market?
13 Sumita is a professor in [3]
a reputed business
institute. While
explaining the
procedure of stock
exchange trading, she
shared with her
students that many
years back she had
bought 200 shares of a
leading automobiles
company. As per the
settlement procedure
she paid for the shares
and received the share
certificates in physical
form. However, when
 she had sent those
certificates to the
company to get them
endorsed in her name,
she was informed by
the company that those
certificates were
duplicate.Therefore, in
order to protect the
investors from many
such malpractices, now
only screen - based
trading is done and
dematerialisation is
compulsory.

1. What is screen
based trading?

2. Give the
meaning of
’dematerialisati
on’. State any
two of its
advantages.

14 What are the functions [3]

of a financial market?
15 Calling for [3]
information by
undertaking
inspection,
conducting enquiries
and audits of stock
exchanges and
intermediaries is a
function performed by
Securities and
Exchange Board of
India. State any two
other functions of the
same category.
16 “Securities and [3]
Exchange Board of
India (SEBI) is the
watchdog of the
 securities market”. Do
you agree? Give four
reasons in support of
your answer.
17 Name and state the [3]
document prepared in
the process of online
trading of securities
that is legally
enforceable and helps
to settle
disputes/claims
between the investor
and the broker.
18 ‘Stock exchange not [3]
only contributes to the
economic growth, but
also performs many
other functions’.
Explain any three such
functions.
19 During Navratri, Varun [3]
finalises a deal to buy a
new house. So, he visits
a nearby branch of
’Subh Bank’ to
withdraw Rs. 10 lakhs
from his account in
order to pay the token
money to the seller. In
the bank, he observes
that a large number of
customers are present
to make cash with
drawls, probably
because it is an
auspicious time to
make purchases. After
sometime, he
overhears one of the
bank staff members
telling his colleague
that, "Today ’Subh
Bank’ is likely to fall
short of cash and to
 make up for the deficit
and maintain its cash
reserve ratio it will
have to approach
another bank.In the
context of the above
case:

1. Identify the
instrument that
’Subh Bank’ will
use to meet its
short term
requirements of
funds.

2. State any three

feature of the
instrument as
identified in
part (a).

20 Vikrant Electronics Ltd. [3]

invited subscriptions
from the public
through the issue of
prospectus. Ekta
applied for 1000
shares but was allotted
only 500 shares by
Vikrant Electronics Ltd.
After six months she
decided to sell 250 of
these shares.

1. Which market
Ekta should
approach?

2. State any four

advantages of
selling through
such a market.

21 State any three [3]

development functions
of Securities and
 Exchange Board of
India (SEBI).
22 Incorporated in 1990, [3]
Raju Dairy Ltd., is one
of the leading
manufacturers and
marketers of dairy -
based branded foods in
India. In the initial
years, its operations
were restricted only to
thecollection and
distribution of milk.
But, over the years it
has gained a
reasonable market
share by offering a
diverse range of dairy -
based products
including fresh milk,
flavoured yogurt, ice
creams, buttermilk,
cheese, ghee, milk
powders etc. In order
to raise capital to
finance its expansion
plans, Raju Dairy Ltd.
has decided to
approach capital
market through a mix
of Offer for sale of Rs.4
crore shares and a
public issue ofRs.2
crore shares.In context
of the above case:

1. Name and
explain the
segment of
capital market
being
approached by
the company.

2. Identify the two

methods of
 floatation used
by the company
to raise the
required capital.
Give one
difference
between them.

23 Ketan won a cash prize [3]

of Rs. 20,000in the
National level Robotics
Competition. On the
advice of his father, he
visits a nearby bank to
open a Fixed deposit
account in his name
with the prize money.
His sister Suhasini
accompanied him to
the bank. On reaching
the bank, he notices big
banners which are
placed within the
premises containing
information about the
various arrangements
through which
corporates may raise
their capital through
the bank. Being a
finance graduate,
Suhasini explains to
Ketan that banks play
the role of the financial
intermediary by
helping in the process
of channelizing the
savings of the
households into the
most profitable
business ventures.In
the context of the
above case:

1. Name another
financial
 intermediary
that helps in the
process of
channelizing the
savings of the
households into
the most
productive use.

2. Also, outline any

two functions of
another
financial
intermediary as
identified in
part (a).

24 State any three [3]

protective functions of
Securities and
Exchange Board of
India (SEBI).
25 State the objective of [3]
NSE?
26 What does the [3]
abbreviation SEBI
stand for? Explain the
term Sensex. How
many shares are
included in the Sensex?
27 Stock markets impart [3]
liquidity to
investments.
Comment.
28 What are the objectives [3]
of SEBI?
29 What is meant by [3]
primary market?
Explain any two
methods of floating
new issues in the
primary market.
30 The Bombay Stock [3]
Exchange (BSE) is
 Asia’s first stock
exchange and the
world’s 11th largest
stock exchange. It
became the first stock
exchange to be
recognized by the
Indian Government
under the Securities
Contracts Regulation
Act. Its automated,
screen - based trading
platform called BSE On
- Line Trading (BOLT)
had a capacity of 8
million orders per day.
The BSE has also
introduced a
centralized exchange -
based internet trading
system, BSEWEBx.co.in
to enable investors
anywhere in the world
to trade on the BSE
platform.In the context
of the above case:

1. Name the
organisation
that regulates
the working of
stock exchanges
in India.

2. State any three

performed by
stock
exchanges.

3. Give any two

advantages of
screen - based
trading.

31 Unicap Ltd. was [4]

proposing to issue
10,000, 8% Debentures
 of₹ 1,000 each and
Certificate of Deposit of
₹ 25,00,000 for
meeting its fund
requirements during
expansion.

1. Identify the
markets from
where they can
find the
required
amount by
quoting the
lines from the
question.

2. Distinguish
between them
on any two
bases.

32 State any one [4]

‘Protective Function’ of
Securities and
Exchange Board of
India (SEBI).
33 ‘Ganesh Steel Ltd’ is a [4]
large and creditworthy
company
manufacturing steel for
the Indian market. It
now wants to cater to
the Asian market and
decides to invest in
new hi - tech
machines. Since the
investment is large, it
requires long - term
finance. It decides to
raise funds by issuing
equity shares. The
issue of equity shares
involves huge
floatation cost. To meet
the expenses of
 floatation cost the
company decides to tap
the money - market.

1. Name and
explain the
money market
instrument the
company can
use for the
above purpose.

2. What is the
duration for
which the
company can
get funds
through this
instrument?

34 The electronic book [4]

entry form of holding
and transferring
securities has
eliminated the
problems of theft and
forgery. Discuss the
concept indicated in
the given statement.
35 Enumerate any one [4]
objective of setting up
of SEBI.
36 State the advantages of [4]
dematerialisation of
shares.
37 What are the functions [4]
of a Stock Exchange?
Explain any four.
38 The SEBI has imposed [4]
a penalty of Rs.7,269.5
crore on Pearls
Agrotech Corporation
Limited (PACL) and its
four directors —
Tarlochan Singh,
Sukhdev Singh,
Gurmeet Singh and
Subrata Bhattacharya
who had mobilised
funds from the general
public through illegal
collective investment
schemes in the name of
purchase and
development of
agriculture land. While
imposing the penalty,
the biggest in its
history, Securities and
Exchange Board of
India (SEBI) said the
company deserved
"maximum penalty" for
duping the common
man. Its Prevention of
Fraudulent and Unfair
Trade Practices
Regulations provides
for "severe to severe
penalties" for dealing
with such violations. As
per SEBI norms, it can
impose a penalty of
Rs.25 crore or three
times of the profit
made by indulging in
fraudulent and unfair
trade practices and in
the present case, the
regulator has imposed
a fine equivalent to
three times of the illicit
gains. In context of the
above case:

1. State the
objectives of
setting up SEBI.

2. Identify the type

of function
 performed by
SEBI by quoting
lines from the
paragraph.

39 Stock exchange acts as [4]

a regulator of the
securities market. It
creates a continuous
market where the
securities are bought
and sold. It gives
investors the chance to
disinvest and reinvest.
Through this process of
disinvestment and
reinvestment, savings
get channelized into
their most productive
investment avenues. To
ensure that the
investing public gets a
safe and fair deal in the
market, the
membership of the
stock exchange is well
regulated and its
dealings are well
defined according to
the existing legal
framework. It also
ensures wider share of
ownership by
regulating new issues,
better trading practices
and taking effective
steps in educating the
public about
investments. Various
functions performed by
the Stock Exchange are
discussed in the above
para. By quoting lines
from the above para,
state any four functions
of stock exchange.
40 These days, the [4]
development of a
country is also judged
by its system of
transferring finance
from the sector where
it is in surplus to the
sector where it is
needed most. To give
strength to the
economy, SEBI is
undertaking measures
to develop the capital
market. In addition to
this there is another
market in which
unsecured and short -
term debt instruments
are actively traded
everyday. These
markets together help
the savers and
investors in directing
the available funds into
their most productive
investment
opportunity.

1. Name the
function being
performed by
the market in
the above case.

2. Also, explain
briefly three
other functions
performed by
this market.

41 SEBI is the watch dog [4]

of security market. Do
you agree? Give reason.
42 Explain the trading [4]
procedure on a stock
exchange.
43 Aditya Khosla, the [4]
Managing Director of
‘D.L.W. Ltd.’ and Rajesh
Puri, the Finance
Manager were
discussing about
avenues of investing
the idle funds of the
company. Aditya
Khosla was of the
opinion that money
should be invested in
the capital market
whereas Rajesh Puri,
being more
conservative, felt that it
would be better if the
investment was made
in the money market.
Since the economy was
buoyant, the Managing
Director convinced
Rajesh that they should
take advantage of it
and invest in the
capital market to get
good returns.
Ultimately it was
decided to invest the
idle funds in the capital
market.

1. What kind of
instruments
should the
company buy?

2. Why is the
capital market
expected to give
a better return
in a buoyant
economy? State
the reason.

3. Why and how

 safe are the
securities in this
market as
compared to the
money market?

44 These days, the [4]

development of a
country is also judged
by its system of
transferring finance
from the sector where
it is in surplus to the
sector where it is
needed the most. To
give strength to the
economy, SEBI is
undertaking measures
to develop the capital
market. In addition to
this, there is another
market in which
unsecured and short -
term debt instruments
are actively traded
every day. These
markets together help
the savers and
investors in directing
the available fund into
their most productive
investment
opportunity.

1. Name the
function being
performed by
the market in
the above case.

2. Name the
market segment
other than the
capital market
segment in
which
 unsecured and
short - term
debt
instruments are
traded. Also,
give any three
points of
difference
between the
two.

45 State one [4]

developmental
function of SEBI.
46 Agree or not with the [4]
statement. “Primary
market directly
contributes to capital
formation, whereas
secondarymarket does
so indirectly.”
47 Explain Private [4]
Placement and Rights
Issue as methods of
floatation of new issues
in the primary market.
48 Explain Capital Market. [4]
Give two parts of
capital market.
49 State any one function [4]
of Stock Exchange.
50 Distinguish between [4]
Capital Market and
Money Market.
51 Money market [4]
instruments are more
liquid as compared to
capital market
instruments?
52 After completing the [4]
Online NSE Academy
Certified Capital
Market Professional (E
- NCCMP) course
Bhavya along with her
five other school
friends started an
investment portal for
online trading and
investment under the
name ’Go Lucky’. As
per law, in order to
open an account with a
Depository, they first
got their business
registered with the
Securities and
Exchange Board of
India.Through ’Go
Lucky’ portal an
investor can either
trade in existing
securities of the
companies or invest in
the e - ipos. In the
context of the above
case:

1. What is the
name given to
the
intermediaries
like ’Go Lucky’
who serve as a
link between
investors and
depository?

2. Name the
depositories
operating in
India..

3. Mention any
one function
being
performed by
’Go Lucky’ as a
DP.
 4. What are the
two segments of
the capital
market in which
an investor can
deal through ’Go
Lucky’ portal?

53 A few years back, [4]

people were not in the
habit of saving. Its
main reason was lack
of good opportunities
for investment. Lack of
saving and investment
habit of the people had
a direct effect on the
economic development
of the country. As a
result, the pace of
economic development
of the country
remained quite slow.
When the country was
grappling with the
problem, a kind of
market emerged that
helped in establishing
industries and at the
same time made good
opportunities for
investment available.
With the setting - up of
such a market, people
acquired the habit of
affecting saving. These
savings were invested.
Gradually, economic
development
proceeded ahead. It is a
kind of market that can
be called as a
barometer of a
country’s economic
development. It has its
own rules and bye -
 laws which help in its
operations and also in
safeguarding the
interests of the
investors. Moreover, it
has to comply with the
guidance issued by
SEBI. This market
operates under the
supervision of a
management
committee.

1. Identify the
market
mentioned in
the above
paragraph.

2. Explain two
characteristics
of the market as
identified vide
point (i) above.

3. Identify any two

values that this
market provides
to society.

54 Foods India Ltd.is a [4]

company engaged in
the production of
packaged juice since
2010. Over this period,
a large number of
competitors have
entered the market and
are putting a tough
challenge to ‘Foods
India Ltd.’. To face this
challenge and to
increase its market
share, the company has
decided to replace the
old machinery with an
estimated cost of Rs
 100 crores. To raise
finance, the company
decided to issue 9%
debentures. The
Finance department of
the company has
estimated that the cost
of issuing the 9%
debentures will be Rs
10,00,000. The
company wants to
meet its floatation cost.

1. Explain the
instrument that
the company
may issue for
this purpose.

2. In which type of
financial
market, is the
instrument
explained in (a)
above traded?
Also, explain
how safe the
instruments are
in this market.

55 What is meant by a [4]

primary market ?
Briefly explain the
concept of an initial
public offer .
56 What is meant by a [6]
Stock Exchange ? State
any three functions of a
Stock Exchange .
57 Give the meaning of [6]
financial market. State
any four functions of
financial market.
58 With the explosive [6]
growth of its
subscriber base, to fuel
 its expansion plan AHM
Telecom Co. Ltd. wants
to raise₹ 500 crore by
issuing equity shares.

1. Identify and
state the market
AHM Telecom
Co. Ltd. will look
for to raise
funds worth₹
500 crore to fuel
its expansion
plan by issuing
equity shares.
Give reason in
support of your
answer.

2. Explain any four

methods
through which
AHM Telecom
Co. Ltd. can
issue equity
shares.

59 Primary markets [6]

contribute to capital
formation directly,
secondary markets do
so indirectly. Explain.
60 Explain the trading [6]
procedure under the
Depository System.
61 India’s largest [6]
domestic investor Life
Insurance Corporation
of India has once again
come to the
government’s rescue
by subscribing 70% of
Hindustan Aeronautics’
Rs 4,200 - crore initial
public offering.
 1. Which market is
being reflected
in the above
case?

2. State which
method of
floatation in the
above -
identified
market is being
highlighted in
the case?
(Primary
Market)

3. Explain any two

other methods
of floatation.
(Private
Placement, Offer
through
prospectus,
offer for sale).

62 Explain the regulatory [6]

functions of SEBI.
63 Raheja Softwares Ltd. [6]
is a well - known name
in the market for the
last ten years. Now, it
wants to set up new
projects for the
expansion and
modernisation of
existing projects. For
this purpose, it is
opting for two different
methods of floating
new issues.Firstly,
securities are sold to
issuing houses or
stockbrokers at an
agreed price which
they resell to the
investing public.
 Secondly, one share is
offered against five
shares (which
shareholders already
possess) to the existing
shareholders. This is a
privilege given to them.

1. In which type of
capital market
the above issue
of securities is
covered?

2. Write the name

of the methods
used for issue of
securities by
Raheja
Softwares Ltd.

3. List any two

investors in this
market.

64 State any five functions [6]

of Stock Exchange .
65 Differentiate between [6]
Capital Market and
Money Market on the
basis of following:

1. Participants

2. Instruments

3. Expected
Return

4. Safety

5. Duration

66 Explain the advantages [6]

of the electronic
trading system or
screen - based trading?
67 Explain the objectives [6]
 and functions of SEBI.
68 Explain the two main [6]
segments of the NSE.

69 You are a financial [6]

expert. The students of
Vaani Public School has
invited you to explain
the steps in the trading
procedure of stock
exchange. How will you
do it?
70 Distinguish between [6]
primary and secondary
markets.
71 Explain the steps in the [6]
trading and settlement
procedure?
72 Explain the concept of [6]
depository and name
and explain two types
of depositories in
India?
73 Madhav’s is one of the [6]
India’s most trusted
brands in Indian
sweets and snacks
segment. The company
has manufacturing
plants in Kota, Kanpur,
New Delhi, and
Mumbai. Madhav’s has
its own retail chain
stores and a range of
restaurants in these
cities. Now, the
company plans to
extend its business in
12 more cities in India.
In order to raise the
funds, its directors
have decided to float a
public issue through
the prospectus.
 Besides, it intends to
raise money to meet
the floatation costs in
terms of brokerage,
underwriting
commission,
advertising etc.In the
context of the above
case:

1. What is the
other name
used for the
funds required
to meet
floatation costs?

2. Describe briefly
the short term
instrument
popularly used
by the
companies to
raise for the
funds required
to meet
floatation costs.
Who can issue
them?

3. Distinguish
between the
two types of
financial
markets that the
company
intends to
approach to
meet its
financial needs.

74 Dev opened a D - mat [6]

account with a reputed
stock broker. As per
the advice of his
brother who actively
trades in securities he
placed an order to buy
100 shares of Mega Ltd.
at the current price of
Rs. 430 per share. Later
on, he has issued two
documents first one on
placing the order and
second one after
execution of his order
online. Also, the broker
forwarded a legally
enforceable document
to Dev within 24 hours
of the execution of the
order. There after he
was asked to make a
payment of Rs. 43,000
plus commission. He
was told that the
broker will first make
the payment to the
exchange and
thereafter the
exchange will make
payment to the other
broker who will further
forward it to the
investor who has sold
these securities.In the
context of the above
case:

1. Identify and
explain the
various
documents
mentioned
above which
were issued to
Dev during the
process of
screen based
trading.

2. Name the two

phases involved
 in the
settlement
process of
screen based
trading
described above
wherein one of
them is to be
carried out
before T+2 day
and the other
one on the T+2
day by quoting
lines from the
paragraph.

75 Describethe trading [6]

and settlement
procedure of stock
exchange.