AS 05 (iv) - Finance and Investment Mock Test 13
This section explains important concepts related to mutual funds, stock market orders, futures contracts, company formation, valuation norms, partnerships, trusts, commodity markets, and co-operatives. It covers the liquidity benefits offered by mutual funds, the features of Good Till Cancelled (GTC) orders, types of futures contracts, the significance of the Certificate of Incorporation, valuation of suspended securities, contract maturity in futures, the legal nature of partnerships, charitable remainder unitrusts, the role of commodity markets, and the ownership structure of co-operatives. These concepts help investors understand financial markets, investment products, business organizations, and regulatory practices for effective financial decision-making.
1. What type of 'Liquidity' does a Mutual Fund provide to investors?
A. Only amount-wise liquidity
B. Only time-wise liquidity
C. Two kinds of liquidity: time-wise liquidity and amount-wise liquidity; mutual funds generally provide both, allowing investors to withdraw any amount at any time subject to applicable conditions
D. Fixed liquidity based on investment horizon
E. No liquidity until maturity
2. A GTC (Good Till Cancelled) Order is:
A. An order valid only for one day
B. An order that remains in the system until it is cancelled by the Trading Member; it can remain active across multiple trading days if not executed, subject to the maximum validity period prescribed by the Exchange
C. An order valid for one week only
D. An order that is automatically cancelled after three days
E. An order that cannot be cancelled once placed
3. What are the 'Types of Future Contracts' classified in the chapter?
A. Exchange-traded, OTC, and Hybrid futures
B. Equity Futures, Interest Rate Futures, and Foreign Exchange Futures
C. Commodity, Currency, and Bond Futures
D. Long-term, Medium-term, and Short-term Futures
E. Speculative, Hedging, and Arbitrage Futures
4. What is the Certificate of Incorporation?
A. The document that authorizes the company to issue shares to the public
B. The document issued by the Registrar of Companies after approval of the company name and Memorandum, legally bringing the company into existence and enabling it to commence business as permitted by law
C. The document that certifies the appointment of auditors
D. The annual return submitted to the Registrar
E. The document that establishes the company's registered office
5. Under the Mutual Fund valuation norms, if trading in a security is suspended for more than 30 days, who decides the valuation norms?
A. SEBI directly determines the valuation
B. The Stock Exchange determines the valuation
C. The AMC/Trustee decides the valuation norms and documents them
D. The Ministry of Finance determines the fair value
E. AMFI sets the valuation for all suspended securities
6. What is 'Contract Maturity' in futures terminology?
A. The date on which the futures contract was entered
B. The period over which a contract trades; in India, futures contracts commonly have maturities of 1, 2, and 3 months
C. The amount of profit made when a futures contract expires
D. The total value of futures contracts outstanding in the market
E. The rate at which the futures price converges to the spot price
7. Partnerships are effectively described as:
A. Separate legal entities distinct from their shareholders
B. Collections of sole proprietors
C. Enterprises owned and controlled by the people working in them
D. Entities created to hold assets for the benefit of certain persons
E. Companies with minimum share capital requirements
8. What is a 'Charitable Remainder Unitrust'?
A. A trust that gives all assets to the trustor's family
B. A court-decreed trust over property held by someone for its owner
C. A type of trust that provides for the eventual distribution of the trust corpus (assets) to a charity, while offering significant tax benefits under applicable laws
D. A trust created by a will to manage assets given to beneficiaries
E. A trust that can only be revoked by a court order
9. Commodity Markets are markets where:
A. Only stocks and bonds are exchanged
B. Raw or primary products are exchanged and traded on regulated commodity exchanges through standardized contracts
C. Only currencies are bought and sold
D. Only derivatives based on interest rates are traded
E. Only manufactured goods are traded
10. What is a Co-operative?
A. A partnership where one partner has unlimited liability
B. An enterprise owned and controlled by the people working in it
C. A company where shareholders have limited liability
D. A trust where assets are held for beneficiaries
E. A professional association formed to protect professional interests
