UNIT 1

1. Which of the following is a primary function of financial markets?

a) Providing a platform for short-term investments​

b) Facilitating price discovery​
c) Managing government policies​
d) Controlling inflation

Answer: b) Facilitating price discovery

2. What is the main role of the Reserve Bank of India (RBI) in the financial
system?

a) Issuing bonds and stocks​

b) Regulating monetary policy and controlling inflation​
c) Offering direct loans to the public​
d) Managing the stock exchange

Answer: b) Regulating monetary policy and controlling inflation

3. The money market is primarily used for:

a) Long-term investments​
b) Short-term financial instruments​
c) Trading equities and bonds​
d) Foreign direct investment

Answer: b) Short-term financial instruments

4. Which of the following is NOT a type of financial institution?

a) Commercial banks​
b) Mutual funds​
c) FMCG companies​
d) Non-banking financial companies (NBFCs)

Answer: c) FMCG companies

5. The capital market deals with financial instruments having a maturity
period of:

a) Less than one year​

b) One to five years​
c) More than one year​
d) More than ten years

Answer: c) More than one year

6. SEBI (Securities and Exchange Board of India) was established to:

a) Regulate the banking sector​

b) Control the insurance industry​
c) Protect investors and regulate the securities market​
d) Manage foreign exchange reserves

Answer: c) Protect investors and regulate the securities market

7. Treasury bills are issued by:

a) Corporate firms​
b) The central government​
c) Commercial banks​
d) The stock exchange

Answer: b) The central government

8. The main objective of monetary policy is to:

a) Promote exports​
b) Control inflation and stabilize the economy​
c) Increase government revenue​
d) Regulate stock market operations

Answer: b) Control inflation and stabilize the economy

9. Which of the following is a key function of commercial banks?

a) Regulating monetary policy​

b) Printing currency​
c) Accepting deposits and granting loans​
d) Managing foreign trade policies

Answer: c) Accepting deposits and granting loans

10. The term "financial inclusion" refers to:

a) The availability of financial services to all sections of society​

b) The expansion of stock market activities​
c) The growth of international banking institutions​
d) The privatization of financial institutions

Answer: a) The availability of financial services to all sections of society

UNIT 2

MCQs with Answers: Financial Institutions and Markets

1.​ Which of the following is NOT a function of financial markets?​

a) Mobilizing savings​
b) Facilitating liquidity​
c) Controlling fiscal policies​

✅
d) Providing investment avenues​
Answer: c) Controlling fiscal policies​

2.​ Which regulatory body oversees the securities market in India?​

a) RBI​
b) SEBI​
c) IRDAI​

✅
d) NABARD​
Answer: b) SEBI​

3.​ What is the primary role of the money market?​

a) Long-term capital raising​
b) Short-term fund mobilization​
 c) Regulating foreign exchange​

✅
d) Controlling inflation​
Answer: b) Short-term fund mobilization​

4.​ Which of the following is an example of a capital market instrument?​

a) Treasury Bills​
b) Commercial Papers​
c) Equity Shares​

✅
d) Certificate of Deposit​
Answer: c) Equity Shares​

5.​ Who is the main participant in the primary market?​

a) Investors buying secondary shares​
b) Government issuing treasury bonds​
c) Companies issuing new securities​

✅
d) Brokers facilitating trades​
Answer: c) Companies issuing new securities​

6.​ Which financial institution is responsible for refinancing rural credit institutions in
India?​
a) RBI​
b) SEBI​
c) NABARD​

✅
d) IRDAI​
Answer: c) NABARD​

7.​ What is the full form of IPO?​

a) Initial Public Offering​
b) Investment Portfolio Optimization​
c) International Profit Organization​

✅
d) Indian Private Offer​
Answer: a) Initial Public Offering​

8.​ What does CRR stand for in banking?​

a) Cash Reserve Ratio​
b) Credit Risk Rating​
c) Capital Reinvestment Ratio​

✅
d) Current Rate Regulation​
Answer: a) Cash Reserve Ratio​

9.​ Which segment of the financial market deals with short-term funds?​
a) Capital Market​
b) Money Market​
c) Derivatives Market​
 ✅
d) Foreign Exchange Market​
Answer: b) Money Market​

10.​Which organization regulates insurance companies in India?​

a) RBI​
b) SEBI​
c) IRDAI​

✅
d) NABARD​
Answer: c) IRDAI​

UNIT 3

1. Which of the following is a primary function of financial institutions?

a) Providing loans and advances​

b) Manufacturing consumer goods​
c) Conducting trade agreements​
d) Producing government policies

Answer: a) Providing loans and advances

2. The Reserve Bank of India (RBI) primarily regulates which of the

following?

a) Stock markets​
b) Insurance companies​
c) Commercial banks​
d) Real estate firms

Answer: c) Commercial banks

3. Which of the following financial markets deals with short-term funds?

a) Capital market​
b) Money market​
c) Derivatives market​
d) Foreign exchange market

Answer: b) Money market

4. Which financial instrument represents ownership in a company?

a) Bonds​
b) Fixed deposits​
c) Equity shares​
d) Treasury bills

Answer: c) Equity shares

5. SEBI is responsible for regulating which of the following markets?

a) Foreign exchange market​

b) Commodity market​
c) Stock market​
d) Money market

Answer: c) Stock market

6. A Treasury Bill (T-bill) is issued for what purpose?

a) Raising long-term capital​

b) Managing short-term liquidity needs of the government​
c) Financing infrastructure projects​
d) Funding insurance claims

Answer: b) Managing short-term liquidity needs of the government

7. Which of the following institutions is an example of a non-banking

financial company (NBFC)?

a) ICICI Bank​
b) HDFC Ltd.​
c) State Bank of India​
d) Bank of Baroda

Answer: b) HDFC Ltd.

8. The call money market is primarily used for:

a) Long-term investment​
b) Short-term borrowing by banks​
c) Foreign exchange transactions​
d) Buying government securities

Answer: b) Short-term borrowing by banks

9. Which of the following best describes an Initial Public Offering (IPO)?

a) A secondary market transaction​

b) The first time a company issues shares to the public​
c) A loan taken by a company​
d) A government bond issue

Answer: b) The first time a company issues shares to the public

10. The main purpose of mutual funds is to:

a) Offer fixed returns like bank deposits​

b) Pool funds from investors to invest in diversified assets​
c) Provide insurance coverage​
d) Issue government bonds

Answer: b) Pool funds from investors to invest in diversified assets

UNIT 4
MCQs with Answers: Financial Institutions and Markets

1.​ Which of the following is NOT a function of a financial institution?​

a) Mobilizing savings​
b) Providing credit facilities​
c) Manufacturing consumer goods​
d) Facilitating risk management​

✅
​
Answer: c) Manufacturing consumer goods​

2.​ Which institution regulates the money market in India?​

a) SEBI​
b) RBI​
c) IRDAI​
d) NABARD​

✅
​
Answer: b) RBI​

3.​ The primary function of the capital market is to:​

a) Provide short-term funds​
b) Provide long-term funds​
c) Regulate bank deposits​
d) Control foreign exchange​

✅
​
Answer: b) Provide long-term funds​

4.​ Which of the following is an example of a primary market instrument?​

a) Government bonds​
b) Initial Public Offering (IPO)​
c) Certificate of Deposit (CD)​
d) Treasury Bills​

✅
​
Answer: b) Initial Public Offering (IPO)​
5.​ Which financial institution is primarily responsible for regulating the stock market
in India?​
a) SEBI​
b) RBI​
c) NABARD​
d) IRDAI​

✅
​
Answer: a) SEBI​

6.​ What is the main purpose of the secondary market?​

a) Issuing new securities​
b) Trading existing securities​
c) Providing loans to businesses​
d) Regulating mutual funds​

✅
​
Answer: b) Trading existing securities​

7.​ Call money market deals with:​

a) Long-term loans​
b) Short-term borrowing and lending​
c) Foreign exchange transactions​
d) Government securities​

✅
​
Answer: b) Short-term borrowing and lending​

8.​ Which of the following is NOT a component of the financial system?​

a) Financial institutions​
b) Financial markets​
c) Government policies​
d) Manufacturing industries​

✅
​
Answer: d) Manufacturing industries​
 9.​ The key difference between a money market and a capital market is:​
a) The level of government involvement​
b) The time duration of financial instruments​
c) The presence of foreign investments​
d) The role of insurance companies​

✅
​
Answer: b) The time duration of financial instruments​

10.​A debenture is a type of:​

a) Equity instrument​
b) Debt instrument​
c) Derivative​
d) Mutual fund​

✅ Answer: b) Debt instrument