Securities Market and General Awareness MCQs for SEBI Grade A 2020 Exam Part - 4

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 SEBI Grade A  – exam is going to be conducted very soon. To prepare better and to the point, aspirants need to study relevant and valuable material. The below post gives the detailed questions answers for SEBI Grade A Securities Market and General Awareness. Read all MCQs Archive CLICK HERE



Securities Market and General Awareness for SEBI Grade A/ RBI Grade B


Q1. Which bond gives its issuer the right to redeem or pay the bonds before its maturity date?


A. Zero Coupon Bond

B. Puttable Bond

C. Debentures

D. Callable Bonds

E. None of the Above


Explanation: (D) A callable bond allows the issuing company to pay off their debt early. 

  • A business may choose to call their bond if market interest rates move in its favour. Means the prevailing  interest rates are low as compared to the interest the company is paying to the bondholders.

  • Callable bonds are akin to call options, where the issuer has the right to call the bond before maturity.
  • A callable bond is also called as redeemable bond.

  • Issuers (any business entity) entice investors to buy callable bonds by paying higher interest rates on callable bonds than on noncallable bonds.

  • A callable bond also gives the borrower (issuer) the right to pay back the obligation to the lender (bondholder) before the stated maturity date. 


Q2. Which debt financial securities pay off in the short term, usually within one year.


A. Bond Market

B. Money Market

C. Primary Market

D. Secondary Market

E. None of the above.


Explanation: (B) Money Market refers to a financial market securities where these instruments with high liquidity and short-term maturities are traded. 

  • Basically money market instruments are pay off within a very short period generally one year.
  • Money market financial instruments consists of negotiable instruments such as:

          A. Commercial Papers.

          B. Treasury Bills

                      Following are the types of T-bills in India:

                     1. 14-day Treasury bill

                     2. 91-day Treasury bill

                     3. 182-day Treasury bill

                    4. 364-day Treasury bill

        C. Certificates of Deposit.


  • The Money Market instruments are usually traded over-the-counter (OTC), and therefore, it has to be done through a financial intermediary especially a broker dealing in money market financial instruments or money market mutual fund.

  • The investment period in money market financial instruments is very short, ranging from three months up to a year.


Q3. What does E stands for in ECBs?


A. External

B. Extreme

C. Easy

D. Economy

E. None of the above


Explanation: (A) ECB stands for External Commercial Borrowings.


  • External commercial borrowing are loans in India made by non-resident lenders in foreign currency to Indian borrowers. In simple terms ECBs allows Indian firms to raise money outside the country in foreign currency.

  • The cost of funds is usually cheaper from external sources if borrowed from economies with a lower rate of interest because that helps the Indian businesses to raise funds cheaply.


Q4. Temporary overdrafts facility by Reserve Bank of India to the Government is known as?


A. Ways and Means Advances

B. Primary Money

C. Overdraft Finance

D. Lending Operation

E. None of the above


Explanation: (A) Ways and Means Advances. 

  • The WMA scheme was introduced on April 1, 1997.

  • Ways and means advances (WMA) is a mechanism used by Reserve Bank of India (RBI) under its credit policy to provide to States, banking with it, to help them tide over temporary mismatches in the cash flow of their receipts and payments.

  • In basic terms, it is the facility for the GoI and states government to borrow money from the Reserve Bank of 

  • India. This facility is done as per the provisions laid down in Section 17(5) of the RBI Act, 1934.

  • Its limits are mutually decided by the Government and RBI.


Q5. An RBI monetary policy instrument which involves buying and selling of government securities to the public or other financial institutions is known as?


A. Interest Rate Operation

B. Open Market Operation

C. Green Shoe Option

D. Fiscal Rate Operation.

E. None of the above.


Explanation: (B) Open Market Operation

  • An open market operation (OMO) is an activity by a central bank to give (or take) liquidity in its currency to (or from) a bank or a group of banks.

  • When the RBI wants to increase the money supply in the economy, it purchases the government securities from the market and it sells government securities to suck out liquidity from the system.

  • RBI uses this operation to maintain money supply or to deal with liquidity problems in the economy.


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