PB1/FMAK/1024/A 27-NOV-2024

PRE-BOARD EXAMINATION – I (2024-25)

ANSWER KEY
Subject: FINANCIAL MARKETS MANAGEMENT Grade: X
SECTION A: OBJECTIVE TYPE QUESTIONS
Q. 1 Answer any 4 out of the given 6 questions on Employability Skills (1 x 4 = 4 marks)
i (a) Verbal communication 1
ii c. It should be owned and controlled by a woman, with 51% of the capital owned by her, and at least 1
51% of employment provided to women.
iii b. It will create more employment and investment options to promote economic growth. 1
iv b. Social Entrepreneurship 1
v [Link] Nations 1
vi c. Critical 1
Q2. Answer any 5 out of the given 6 questions (1 x 5 = 5 marks)
i B) Inflation rate, government policies, and money demand 1
ii b. Corporates issuing securities, intermediaries, and other persons associated with the securities market 1
iii b. A unique identification number for security 1
iv b. To receive dividends within 30 days of declaration 1
v [Link] calculated on both the principal and accrued interest 1
vi [Link]-to-Equity Ratio 1
Q3. Answer any 5 out of the given 6 questions (1 x 5 = 5 marks)
i b. Immediate liquidity with moderate returns 1
ii d Primary market and secondary market segments 1
iii b. Through the clearing corporation of the exchange 1
iv c. Offer continuous subscription and redemption 1
v [Link] Capital 1
vi c. Acid-Test Ratio 1
Q4. Answer any 5 out of the given 6 questions (1 x 5 = 5 marks)
i (a) Both (A) and (R) are true, and (R) is the correct explanation of (A). 1
ii [Link] is traded on an exchange and standardized 1
iii [Link] returns 1
iv b. Market capitalization 1
v b. A rupee today is worth more than a rupee in the future 1
vi b. To ensure that required disclosures are made and investor interests are safeguarded 1
Q5. Answer any 5 out of the given 6 questions (1 x 5 = 5 marks)
i b. Stocks from companies with little growth potential 1
ii b. put 1
iii [Link] AND CDSL 1
iv c. Director’s Report and Chairman’s Statement 1
v b. Ownership, management, and trading are combined into one group. 1
vi b. Dividend plan 1
SECTION B: SUBJECTIVE TYPE QUESTIONS
Answer any 3 out of the given 5 questions on Employability Skills (2 x 3 = 6 marks) Answer each question in 20 –
30 words.
Q.6 Conservation is the key to world environmental problems. This means that we need to judiciously use 2
the resources around us and avoid wasting them. So, we must undertake- air conservation, water
conservation, land conservation, energy conservation.

Q.7 Capital formation role: Mobilization of idle savings takes place when money is invested in a business. 2
 Employment Generation role: Businesses cannot function without employing people.
Q.8 Physical Barriers 2
Linguistic Barriers
Interpersonal Barriers
Organisational Barriers
Cultural Barriers
Q.9 Entrepreneurship has some positive impact on society such as: 2
 Accentuates economic Growth
 Fosters Creativity
 Stimulates Innovation and Efficiency
 Creates Jobs and Employment Opportunities
 Solves the problems of the society.
 Encourages welfare of the society.
Society plays a role in boosting entrepreneurship by:
 Creates needs and demands
 Provides raw materials
 Enables financial support
 Creates a need for education
 Catalyses policy formation and reform
 Facilitates networking
 Supports infrastructure development
Q.10 a) Hard work: Without working hard, no entrepreneur can be successful. 2
b) Optimism: Positivity and belief in what they do is what takes entrepreneurs far in their journey.
c) Independence: Entrepreneurs are confident and like the freedom to take decisions.
d) Energetic: Drive and energy is always high in successful entrepreneurs which makes them extremely
proactive
e) Self-confident: Belief in one’s own vision and abilities and passion for the goal makes successful
entrepreneurs confident.
f) Perseverant: A way of thinking that helps to accept failure, learn from mistakes, not give up,
continuously experiment etc. is crucial for an entrepreneur. Hence, entrepreneurs need to
be persevering in their pursuit.
Answer any 4 out of the given 6 questions in 20 – 30 words each (2 x 4 = 8 marks)
Q.11 Transacting through an intermediary in the securities market is recommended to ensure compliance 2
with regulations and receive professional guidance. Intermediaries, such as brokers, trading members,
and depositories, are familiar with market rules and can facilitate safe, accurate transactions on behalf
of investors. They help investors open accounts, manage demat accounts, and provide access to trading
platforms, reducing the complexities of navigating the market independently. Intermediaries also offer
market insights and financial advice, helping investors make informed decisions and mitigate risks.
Furthermore, they are registered with SEBI, which means they are accountable to the regulatory body
and must adhere to legal standards, offering an additional layer of security. By using intermediaries,
investors can access services like portfolio management, transaction support, and risk management,
making the investing process smoother, more secure, and aligned with best practices.
Q12. Step 1: Calculate Current Liabilities 2
Current Liabilities=800,000/1.6=500,000
So, the current liabilities are ₹500,000.
Step 2: Calculate the New Current Ratio if Liabilities Increase by ₹100,000
If the liabilities increase by ₹100,000, the new current liabilities will be:
New Current Liabilities=500,000+100,000=600,000
Now, use the new current liabilities to calculate the new current ratio:
New Current Ratio = 800,000/ 600,000=1.33
Q.13 Stock-specific factors include a company’s financial health, management, and growth potential. 2
Market-specific factors relate to overall investor sentiment and economic conditions. While stock-
specific factors impact long-term stability, market-specific influences are typically short-term, often
driven by economic changes or industry trends.
Q.14 A Fund Offer Document provides essential details about a mutual fund scheme, including objectives, 2
risks, expenses, and investment policies. It helps investors make informed decisions by disclosing the
fund’s structure and management, aligned with SEBI guidelines to protect investor interests and
 enhance transparency
Q.15 A rolling settlement means that trades are settled within a set period after the trade date. 2
In India, trades follow a T+2 system, where T is the trade date, and settlement, including pay-in and
pay-out, occurs two business days later.
Q.16 Calculate the Gross Profit 2
The Gross Profit can be calculated using the Gross Profit Ratio formula:
Gross Profit=0.25×1,000,000=250,000
So, Gross Profit = ₹250,000
To find the Net Profit, subtract the Operating Expenses from the Gross Profit and add Other Income.
Net Profit=250,000−150,000+20,000=120,000
So, Net Profit = ₹120,000
Net Profit Ratio=1,000,000/120,000×100=12%
Answer any 3 out of the given 5 questions in 50– 80 words each (4 x 3 = 12 marks)
Q.17 The book-building process is a popular method for determining the offer price in an IPO by assessing 4
market demand for the company's shares. During the IPO period, investors place bids for shares within
a specified price band, with each bid reflecting the investor's interest level at different prices. At the end
of the bidding period, the issuer and merchant banker analyze the bids to identify the "cut-off price"
based on the highest demand. This process allows the market, rather than the company alone, to set the
final share price, helping to ensure that the price accurately reflects investor interest and market
conditions. Book-building enhances transparency and minimizes pricing bias, providing a fair approach
to valuing new shares. It also aligns with the interests of both issuers and investors, as the discovered
price balances issuer capital goals with investor appetite.
Q.18 Stock exchanges provide a structured environment for investors to trade shares. In India, buying and 4
selling are done through an electronic platform, the National Exchange for Automated Trading
(NEAT), where buyers and sellers interact without a physical meeting. Orders are placed, matched, and
executed based on a fully automated system, allowing for high-speed transactions with uniform
response times. Stock exchanges operate under the supervision of SEBI, which ensures transparency
and fair practices. They also provide investor protection through mechanisms like the Investor
Protection Fund, reducing the risk of fraud or default by intermediaries. Additionally, exchanges offer
grievance redressal and transparency, ensuring that investors get the best prevailing market prices,
making them key institutions in capital markets.
Q.19 SEBI, or the Securities and Exchange Board of India, is essential in regulating the primary market to 4
protect investor interests, ensure transparency, and maintain market stability. Before a company can
issue shares publicly, SEBI reviews the draft offer document to ensure full and accurate disclosure of
information. This includes financial statements, business prospects, risks, and compliance with legal
standards. SEBI’s regulatory oversight prevents fraudulent activities, protects investors from
misrepresentation, and ensures fair practices in the issuance process. By enforcing strict compliance,
SEBI builds investor confidence, making the securities market a safer environment. Additionally, SEBI
mandates that only SEBI-registered intermediaries are allowed to facilitate transactions, further
safeguarding market integrity. Its role in monitoring IPOs, rights issues, and other public offerings
helps ensure that companies.
Q.20 Whether there is an overall improvement of sales as well as profits. 4
Check for the other income carefully, for here companies have the scope to manipulate. If the other
income stems from dividend on the investments or interest from the loans and advances.
Check for the increase of all expenditure items viz. raw material consumption, manpower cost and
manufacturing, administrative and selling expenses.
Evaluate whether the company could make profit from its operations alone. For this you should
calculate the profits of the company, after ignoring all other income except sales. If the profit so
obtained is positive, the company is operationally profitable, which is a healthy sign.
Calculate the earnings per share and the various ratios. In case of half yearly results, multiply half
yearly earnings per share by 2 to get approximately the annualized earnings per share.
Q21 The Clearing Corporation, such as the National Securities Clearing Corporation Limited (NSCCL) in 4
India, plays a critical role in ensuring smooth and secure stock market transactions.
Its three primary functions are to clear and settle trades, guarantee the financial integrity of
transactions, and manage risks.
The Clearing Corporation verifies and settles each trade by coordinating the exchange of securities and
funds between buyers and sellers, often using a T+2 settlement model (where "T" is the trade date).
It also provides a financial guarantee, assuring that transactions will complete even if a counterparty
defaults.
Moreover, the corporation implements risk management protocols to maintain market stability,
protecting both buyers and sellers. Through these roles, Clearing Corporations provide a structured and
reliable system for executing trades, ensuring investor confidence in the market.