Practice Set 2 Welcome to WORLDONOMICS! Practice Set of Securities MarketsTotal Number of Questions: 40Time: 40 MinutesAll the best...Kind RegardsCMA Madhuri Kashyap & CMA Sandeep Kumar - Founder - International Navodaya Chamber of Commerce Name Email 1. What are the two primary types of securities in the securities market? Equity and Bonds Debt and Equity Bonds and Mutual Funds Commodities and Equity None 2. Which of the following is a characteristic of equity securities? Fixed return Ownership of the company No risk Guaranteed repayment of principal None 3. What does "asset allocation" refer to? Choosing specific stocks to invest in Dividing investments among various asset classes Concentrating all investments in one sector Avoiding all risky investments None 4. Which of the following is NOT a hybrid instrument? Convertible bonds Preference shares Warrants Corporate bonds None 5. What is the main difference between equity and debt financing? Equity represents ownership; debt represents a loan Debt is perpetual; equity is short-term Debt is riskier than equity Equity involves fixed returns; debt does not None 6. What is the term for combining different investments to reduce risk? Capitalization Diversification Speculation Consolidation None 7. Which of the following is a key feature of debt securities? Ownership stake in a company Fixed periodic returns Voting rights Highly volatile returns None 8. Commodities are classified as: Real assets Financial assets Hybrid instruments Derivatives None 9. What is a cumulative preference share? A share that pays interest annually A share that allows dividend arrears to be paid in the future A share that has voting rights A share that is non-convertible None 10. What does "price discovery" in securities markets mean? Determining the face value of a security Calculating the fixed returns on investments Identifying the fair price based on supply and demand Setting a fixed price for IPOs None 11. What is a key risk associated with equity investments? Guaranteed returns Fixed periodic dividends Market price volatility Early redemption None 12. What is a key feature of debt instruments? Ownership rights Residual claims on profits Fixed maturity Variable returns None 13. Which asset class typically offers the highest long-term returns? Debt securities Commodities Equity securities Fixed deposits None 14. A portfolio with investments in equity, debt, and commodities is an example of: Concentrated investment Leveraged investment Diversified investment Speculative investment None 15. What determines the dividend rate for equity shareholders? Fixed annual payout Company's profitability Government regulations Bond market performance None 16. What does "maturity" refer to in debt securities? The period over which interest is earned The time when the principal is repaid The age of the bondholder The growth potential of the security None 17. Which of these is a characteristic of mutual funds? Investments in only one asset class Fixed returns for all investors Pooled funds invested across various asset classes No regulatory oversight None 18. Which instrument combines features of debt and equity? Debentures Convertible bonds Equity shares Fixed deposits None 19. Why are commodities considered a "real asset"? They are physically tangible They are always highly liquid They guarantee fixed returns They are not traded in financial markets None 20. What is a derivative? A type of equity security A contract based on the value of an underlying asset A fixed-income instrument A commodity investment None 21. What is the purpose of asset allocation? Maximizing tax benefits Achieving an optimal risk-return balance Avoiding investments in risky assets Concentrating investments in one sector None 22. Which of the following is a high-risk investment? Government bonds Fixed deposits Equity in start-ups Treasury bills None 23. What is a key advantage of debt financing for a company? Dilution of ownership Regular dividends No obligation to repay Fixed cost of capital None 24. A financial instrument that guarantees fixed returns is typically: Equity Debt Commodities Derivatives None 25. What is the role of hybrid instruments? To offer fixed returns To combine the benefits of debt and equity To replace equity in a portfolio To provide risk-free returns None 26. What is the primary objective of investing in distressed securities? Tax savings Guaranteed return High-risk, high-return potential Regular dividends None 27. What is the key feature of structured products? Simple to understand No embedded derivatives Highly customized with enhanced returns Suitable for all investors None 28. Which securities are best suited for risk-averse investors? Equity shares Commodities Debt instruments Convertible bonds None 29. Which instrument allows the issuer to avoid immediate dilution of ownership? Equity shares Convertible bonds Preference shares Government bonds None 30. What makes mutual funds ideal for retail investors? High-risk and speculative nature Need for large initial capital Professional management and diversification No regulatory compliance None 31. What is a "zero-coupon bond"? A bond with no interest payments A bond with flexible maturity A bond that pays dividends A bond that cannot be traded None 32. What is the primary benefit of diversification in a portfolio? Maximizing returns Reducing overall risk Avoiding regulatory issues Increasing short-term gains None 33. Which asset class is typically used for hedging inflation? Equity Commodities Debt securities Fixed deposits None 34. Which of the following is NOT a characteristic of equity? Voting rights Fixed maturity Variable returns Ownership stake None 35. Why might a company prefer debt over equity financing? To maintain control over ownership To avoid paying interest To eliminate risk To ensure higher dividends None 36. What is the main disadvantage of equity financing for investors? Fixed returns No ownership rights High risk and market volatility Limited time horizon None 37. Which of the following investments involves the greatest risk? Treasury bills Corporate bonds Equity shares Preference shares None 38. A portfolio designed for income-oriented investors would primarily include: Equity shares Debt instruments Commodities Distressed securities None 39. Which of the following instruments is highly illiquid? Listed equity shares Government bonds Distressed securities Mutual funds None 40. What does "capital appreciation" refer to? Receiving interest payments Increase in the market value of an investment Reduction in investment risk Payment of fixed dividends None Time's upTime is Up!
