IASbaba ’60 Day Plan- Prelims Test 2016 ECONOMICS [DAY 34]

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IASbaba ’60 Day Plan’ – Prelims Test 2016 [Day 34]

Q.1) Consider the following w.r.t. Securities and Exchange Board of India (SEBI).

1. SEBI was established under the Securities and Exchange Board of India act 1992.
2. The Securities Laws (Amendment) Act, 2014 provides for search and seizure after obtaining approval from Union Minister of Finance.
3. National Strategy of Financial Education was initiated by SEBI with a vision of ‘a financially and empowered India’.
4. SEBI is part of Financial Stability and Development Council (FSDC).

Select the correct answer

a) 1, 2 and 4 only

b) 1 and 3 only

c) 1, 3 and 4 only

d) 2, 3 and 4 only

Q.2) In 2012 SEBI brought out regulations for Alternative Investment Funds (AIFs). Which of the following is incorrect?

1. Category I AIFs are those who invest in start-ups or early stage ventures or social ventures that government considers socially or economically viable.
2. Category II AIFs are those funds are allowed to invest anywhere in any combination, but cannot take debts, except for day-to-day operation purposes.
3. Category III AIFs are funds that make short-term investments and then sell, like hedge funds, come under this.
4. Union Budget 2015-16 tax pass through has been given for all 3 categories.

Select the correct answer

a) 1, 2 and 3 only

b) 1, 2 and 4 only

c) 1, 3 and 4 only

d) All of the above

Q.3) Consider the following about Securities Appellate Tribunal (SAT)

1. SAT consists of a presiding officer who is a deputy governor of RBI concerned with money market and capital market.
2. SAT operates under Civil Procedure Code 1908.

Select the correct answer:

a) 1 only

b) 2 only

c) Both 1 and 2

d) None of the above

Q.4) Which of the following are part of the Foreign Investment Promotion Board (FIPB)?

1. Secretary Department of Economic Affairs.
2. Secretary Department of Revenue.
3. Secretary DIPP
4. Principal Secretary to PM
5. Secretary Ministry of Small Scale Industries.

Select the correct answer

a) 1, 2, 3 and 4 only

b) 1, 2, 3 and 5 only

c) 1, 2, 4 and 5 only

d) All of the above

Q.5) FDI is prohibited in which of the following?

1. Lottery business
2. Business of Chit funds.
3. Nidhi Company
4. Manufacturing of Cigars, Cheroots and cigarettes of tobacco
5. Gambling and betting.

Select the correct answer

a) 1, 2 and 4 only

b) 1, 3 and 5 only

c) 1, 2 and 5 only

d) All of the above

Q.6) Which of the following is incorrect about FIPB?

a) The Foreign Investment Promotion Board (FIPB), presently is housed in the Department of Economic Affairs, Ministry of Finance, is an inter-ministerial body.

b) The FIPB was initially constituted under the Prime Minister’s Office (PMO) in the wake of the economic liberalization drive of the early 1990s.

c) The Board was reconstituted in 1996 with transfer of the FIPB to DIPP

d) The approval limit for FIPB is Rs. 2000crore beyond which it needs approval of Union Cabinet.

Q.7) Which of the following is correct about National Investment and Infrastructure Fund (NIIF)?

a) NIIF was set up as a NBFC, to raise debt to invest in the equity of infrastructure finance companies such as Indian Rail Finance Corporation (IRFC) and National Housing Bank (NHB).

b) The objective of NIIF would be to maximize economic impact mainly through infrastructure development in commercially viable projects, only greenfield and not brownfield, but including stalled projects.

c) The NIIF will be established as one or more Alternate Investment Funds (AIF) under the SEBI Regulations.

d) The Government had approved the creation of NIIF with the aim to attract investment from international sources and not domestic for maximizing economic impact.

Q.8) Consider the following about buyback of shares.

1. A buyback is the repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market.
2. Companies will buy back shares either to increase the value of shares still available (reducing supply), or to eliminate any threats by shareholders who may be looking for a controlling stake.

Select the correct answer:

a) 1 only

b) 2 only

c) Both 1 and 2

d) None of the above

Q.9) Recently, the market regulator Securities and Exchange Board of India (SEBI) barred 13 entities from the securities market for five years. They were accused of manipulating Global Depository Receipts (GDRs) issued by Indian companies. Which of the following are correct about GDRs?

1. Global Depository Receipts (GDRs) is a mechanism which allows one to buy and sell shares of a foreign company without having to bother about opening a foreign brokerage account.
2. Global Depository Receipts (GDRs) is a mechanism which allows one to buy and sell shares of a foreign company without having to bother about opening a foreign brokerage account.
3. GDRs are usually backed by sovereign governments of that country that provide companies, investors and traders opportunities to make global investments.
4. Country’s prone to political unrest or geopolitical conflicts can severely impact the valuations of a company, resulting in GDR valuations losses for an investor who may have been betting on that particular company.

Select the correct answer

a) 1 and 2 only

b) 1, 2 and 3 only

c) 1, 2 and 4 only

d) All of the above

Q.10) Consider the following about Participatory Notes (P-Notes).

1. “P-notes,” are financial instruments used by investors or hedge funds that are not registered with the Securities and Exchange Board of India (SEBI) to invest in Indian securities.
2. India has permitted P Notes recently under the expert suggestion of top economist Subramaniam Swamy who considers P Notes will bring back all black money stashed away.

Select the correct answer:

a) 1 only

b) 2 only

c) Both 1 and 2

d) None of the above

Q.11) Consider the following statements:

1. Capital market loans are used by industries for fixed investment.
2. In principle Capital market is a short term loanable fund.

Which of the above statements are correct?

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2 

Q.12) Gilt-Edged securities are the most sought after type securities. Which of the following statements are correct about Gilt-Edged securities?

1. Gilt–edged securities are a high-grade investment with very low risk with confirmed dividend or interest returns.
2. They are based on platinum, gold and silver.

Select the code from following:

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

Q.13) Indian companies are allowed to access global finance market and benefit from the lower cost of funds. They have been permitted to raise resources through which of the following means?

1. American Depository Receipts (ADRs)
2. Global Depository Receipts (GDRs)
3. Foreign Currency Convertible Bonds (FCCBs)
4. External Commercial Borrowings (ECBs)

Select the code from below:

a) 1 and 2

b) 3 and 4

c) 1,2 and 4

d) All of the above

Q.14) Buy Back of shares is a method of financial engineering. It is process which enables the company to go back to its share holders and offer to purchase the shares by them. Which of the following statements are correct about the process of buy-back of shares?

1. When a company faces a cash crunch it buys back its shares.
2. Buy Back is used as a defence mechanism when there is a threat of corporate takeover. It provides a safeguard against hostile takeover by increasing promoter’s holding.
3. Buy Back can divert away the company’s funds from productive investments.
4. A company can buy its shares every year with subject to the satisfaction of other conditions like debt-equity ratio, limits of buy back etc.

Select the code from the following:

a) 1,2 and 3

b) 2,3 and 4

c) 1,3 and 4

d) All of the above

Q.15) A ‘Commercial Paper’ is an important instrument in the money market. Which of the following statements are correct about ‘Commercial Papers’?

1. Commercial paper is an unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories and meeting short-term liabilities.
2. Commercial papers are usually sold at a discount from the face value.
3. It is not backed by collateral, only firms with excellent credit ratings from a recognized credit rating agency will be able to sell their commercial paper at a reasonable price.

Select the code from the following:

a) 1 and 2

b) 2 and 3

c) 1 and 3

d) All of the above

Q.16) Which of the following statements regarding ‘Certificate of Deposits’ are correct?

1. Whenever a big corporation wants to open an account in RBI, it needs to take a prior permission from the Governor. After assessing the performance of the company and its market rating, the corporation is issued a certificate by the bank, called ‘Certificate of Deposit’.
2. Certificate of Deposit (CD) refers to a money market instrument, which is negotiable and equivalent to a promissory note.

Select the code from below:

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2 

Q.17) SEBI has established a Foreign Portfolio Investor Regulatory Framework. Which of the following statements are correct about FPIs according to this framework?

1. All existing Foreign Institutional Investors (FIIs) and QFIs are to be merged into one category called FPI.
2. An applicant desirous of FPI registration should not be a resident in India or a Non-Resident Indian.
3. FPI registration is to be undertaken and granted by Designated Depository Participants (DDPs) on behalf of SEBI.
4. The registration of FPI is temporary and has to be renewed yearly.

Which of the above statements are correct?

a) 1,2 and 3

b) 2,3 and 4

c) 1,3 and 4

d) All of the above

Q.18) Consider the following statements regarding Treasury bills: 

1. Treasury bills are issued by the RBI on behalf of the government of India.
2. Treasury bills are issued through auctions and for a period of 91 days only.
3. State governments are also allowed to issue Treasury bills.
4. Treasury bills are available for a minimum amount of 1 lakh and then in multiples of 25000.

Which of the above statements are incorrect?

a) 1 only

b) 2,3 and 4

c) 1,2 and 3

d) None of the above 

Q.19) Most of the trading in the Indian stock market takes place on its two stock exchanges: the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The BSE has been in existence since 1875. The NSE, on the other hand, was founded in 1992 and started trading in 1994. Which of the following statements are correct about the stock exchanges of India?

1. Both exchanges follow the same trading mechanism, trading hours and settlement process.
2. The number of firms listed in NSE is almost three times than they are listed in BSE.
3. NSE enjoys almost a complete monopoly in Derivative trading.

Select the code from following:

a) 1 and 2

b) 2 and 3

c) 1 and 3

d) All of the above 

Q.20) Which of the following are the characteristics of a ‘Bull’ Market?

1. In a bull market, there is a weak demand and strong supply of securities.
2. Share prices will rise as investors compete to obtain available equity.

Select the code from the following:

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

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IASbaba