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Consider the following statements:
Which of the statements given above is/are NOT correct?
Solution (c)
Capital Indexed Bonds are bonds, the principal of which is linked to an accepted index of inflation with a view to protecting the Principal amount of the investors from inflation.
Hence Statement 1 is incorrect.
Inflation Indexed Bonds (IIBs) are bonds wherein both coupon flows and Principal amounts are protected against inflation
Hence Statement 2 is incorrect.
Solution (c)
Capital Indexed Bonds are bonds, the principal of which is linked to an accepted index of inflation with a view to protecting the Principal amount of the investors from inflation.
Hence Statement 1 is incorrect.
Inflation Indexed Bonds (IIBs) are bonds wherein both coupon flows and Principal amounts are protected against inflation
Hence Statement 2 is incorrect.
Consider the following statements:
Which of the statements given above is/are correct?
Solution (c)
An IDR is an instrument denominated in Indian Rupees in the form of a depository receipt created by a Domestic Depository (custodian of securities registered with the Securities and Exchange Board of India) against the underlying equity shares of issuing company to enable foreign companies to raise funds from the Indian securities Markets.
Hence Statement 1 is correct.
The IDRs are required to be listed in at least one stock exchange in India having nationwide terminals.
Hence Statement 2 is correct.
Solution (c)
An IDR is an instrument denominated in Indian Rupees in the form of a depository receipt created by a Domestic Depository (custodian of securities registered with the Securities and Exchange Board of India) against the underlying equity shares of issuing company to enable foreign companies to raise funds from the Indian securities Markets.
Hence Statement 1 is correct.
The IDRs are required to be listed in at least one stock exchange in India having nationwide terminals.
Hence Statement 2 is correct.
Consider the following statements
Which of the statements given above is/are correct?
Solution (a)
The term ‘Derivative’ indicates that it has no independent value, i.e. its value is entirely ‘derived’ from the value of the underlying asset.
Hence Statement 1 is correct.
Futures Contract means a legally binding agreement to buy or sell the underlying security on a future date.
Hence Statement 2 is incorrect.
Solution (a)
The term ‘Derivative’ indicates that it has no independent value, i.e. its value is entirely ‘derived’ from the value of the underlying asset.
Hence Statement 1 is correct.
Futures Contract means a legally binding agreement to buy or sell the underlying security on a future date.
Hence Statement 2 is incorrect.
Consider the following statements regarding various membership categories in the equity derivatives market:
Which of the statements given above is/are NOT correct?
Solution (c)
Clearing Member (CM): These members are permitted to settle their own trades as well as the trades of the other non-clearing members known as Trading Members who have agreed to settle the trades through them.
Self-clearing Member (SCM) – A SCM are those clearing members who can clear and settle their own trades only.
Hence Statement 1 is incorrect.
A Trading Member is a member of the derivatives exchange and can trade on his own behalf and on behalf of his clients
Hence Statement 2 is incorrect.
Solution (c)
Clearing Member (CM): These members are permitted to settle their own trades as well as the trades of the other non-clearing members known as Trading Members who have agreed to settle the trades through them.
Self-clearing Member (SCM) – A SCM are those clearing members who can clear and settle their own trades only.
Hence Statement 1 is incorrect.
A Trading Member is a member of the derivatives exchange and can trade on his own behalf and on behalf of his clients
Hence Statement 2 is incorrect.
Consider the following statements:
Which of the statements given above is/are correct?
Solution (c)
QFIs do not include FIIs/Sub accounts/ Foreign Venture Capital Investor.
Hence Statement 1 is correct.
Currency futures are contracts to buy or sell a specific underlying currency at a specific time in the future, for a specific price.
Currency future contracts allow investors to hedge against foreign exchange risk.
Hence Statement 2 is correct.
Solution (c)
QFIs do not include FIIs/Sub accounts/ Foreign Venture Capital Investor.
Hence Statement 1 is correct.
Currency futures are contracts to buy or sell a specific underlying currency at a specific time in the future, for a specific price.
Currency future contracts allow investors to hedge against foreign exchange risk.
Hence Statement 2 is correct.
Which of the following is/are Money Market instrument?
Select the correct answer using the codes given below.
Solution (b)
Money Market Instruments are as follows:
Shares of a company are bought and sold in the capital markets which are instruments of long term capital.
Solution (b)
Money Market Instruments are as follows:
Shares of a company are bought and sold in the capital markets which are instruments of long term capital.
Consider the following statements with reference to the Foreign Direct Investment (FDI):
Which of the following statements is/are correct?
Solution (b)
FDI is more stable and less volatile in nature; in contrast the Foreign Portfolio Investments are highly volatile in nature. They are also called the Hot Money, as they can leave India overnight to invest in other markets.
Hence Statement 1 is incorrect
FDI being more stable in nature involves investments with long term profits in mind. They generate profits by locally producing the goods and services, as such are more preferable over the Debt financing as it creates interest obligations even when the business is not running well.
Hence Statement 2 is correct
Solution (b)
FDI is more stable and less volatile in nature; in contrast the Foreign Portfolio Investments are highly volatile in nature. They are also called the Hot Money, as they can leave India overnight to invest in other markets.
Hence Statement 1 is incorrect
FDI being more stable in nature involves investments with long term profits in mind. They generate profits by locally producing the goods and services, as such are more preferable over the Debt financing as it creates interest obligations even when the business is not running well.
Hence Statement 2 is correct
Consider the following statements about Foreign Portfolio Investment (FPI)
Which of the following statements is/are NOT CORRECT?
Solution (d)
Foreign portfolio investment (FPI) is defined as an investment by individuals, firms, or a public body in foreign financial instruments, such as foreign stocks, government bonds, etc.
The returns in the case of FPI are generally in the form of non-voting dividends or interest payments.
Hence Statement 1 is correct
FPI is the passive holding of securities and other financial assets by a foreign firm, which does not entail management control of the issuing firm.
Hence Statement 1 is correct
Solution (d)
Foreign portfolio investment (FPI) is defined as an investment by individuals, firms, or a public body in foreign financial instruments, such as foreign stocks, government bonds, etc.
The returns in the case of FPI are generally in the form of non-voting dividends or interest payments.
Hence Statement 1 is correct
FPI is the passive holding of securities and other financial assets by a foreign firm, which does not entail management control of the issuing firm.
Hence Statement 1 is correct
Consider the following statements with reference to the Venture capitalists (VCs)
Which of the following statements is/are correct?
Solution (c)
Venture capitalists are the mostly the Limited Liability Partnership firms/funds, which raises fund from different investors.
Hence Statement 1 is correct
Venture Capitals generally invests in Growth stage (Series A) and forward, when the company has some proven numbers.
Hence Statement 2 is incorrect
VC’s investment can be either as equity or loan or a mix of both. If it is done by equity they demand a seat in the Board of the company.
Hence Statement 3 is correct
Solution (c)
Venture capitalists are the mostly the Limited Liability Partnership firms/funds, which raises fund from different investors.
Hence Statement 1 is correct
Venture Capitals generally invests in Growth stage (Series A) and forward, when the company has some proven numbers.
Hence Statement 2 is incorrect
VC’s investment can be either as equity or loan or a mix of both. If it is done by equity they demand a seat in the Board of the company.
Hence Statement 3 is correct
Which of the following are the characteristics of a Bull Market?
Which of the statements given above is/are correct?
Solution (b)
In a bull market, we see strong demand and weak supply for securities. In other words, many investors are wishing to buy securities while few are willing to sell. As a result, share prices will rise as investors compete to obtain available equity.
Hence Statement 1 is incorrect.
In a bear market, the opposite is true as more people are looking to sell than buy. The demand is significantly lower than supply and, as a result, share prices drop.
Solution (b)
In a bull market, we see strong demand and weak supply for securities. In other words, many investors are wishing to buy securities while few are willing to sell. As a result, share prices will rise as investors compete to obtain available equity.
Hence Statement 1 is incorrect.
In a bear market, the opposite is true as more people are looking to sell than buy. The demand is significantly lower than supply and, as a result, share prices drop.
