Unit ko samjho · NISM Series IX
Introduction to Capital Market
15 questions is unit mein
Sawaal aur jawaab English mein hain, kyunki NISM ka exam paper bhi English mein hota hai.
Is unit mein kya hai
- Which market allows a company to raise money by issuing new shares to investors?
- What does an ordinary equity share principally represent for its holder?
- Which instrument derives its value from an underlying stock index rather than directly representing company ownership?
- Which institution maintains securities in electronic form through its account system?
- Which financial-market function helps investors convert existing securities into money?
- An investor buys already-listed shares from another investor on an exchange. Who receives the sale proceeds, ignoring transaction charges?
- Which risk most directly concerns a bond issuer failing to make a promised interest payment?
- A ₹1,000 face-value bond pays an annual coupon of 8%. What is its annual coupon payment?
- A bond pays ₹90 annually and trades at ₹900. What is its current yield?
- A company has 2 crore outstanding shares trading at ₹150 each. What is its equity market capitalisation?
- A company needs funds for a ten-year factory project. Which financing instrument most directly matches this long-term requirement?
- What mainly distinguishes a depository participant from a depository for an individual account holder?
- A private equity investor invests ₹20 crore in new shares at an ₹80 crore pre-money valuation. What post-investment ownership results?
- An investor buys 200 shares at ₹120 and receives ₹4 dividend per share before selling at ₹132. What is the total return?
- Market yields rise after a fixed-rate bond is issued. Its promised payments and credit risk remain unchanged. What happens to its theoretical price?
Zaroori ideas
Practice bank se · 1
Which market allows a company to raise money by issuing new shares to investors?
The primary market lets issuers raise capital by selling newly issued securities to investors. Remember: New securities are issued in the primary market.
Hint Common mistake: Confusing a new issue with trading in existing shares. Think about whether the securities are being created or resold.
IX-001Practice bank se · 2
What does an ordinary equity share principally represent for its holder?
An ordinary equity share represents an ownership interest in the company. Remember: Equity holders participate as owners rather than lenders.
Hint Common mistake: Treating a shareholder as a creditor. Recall the difference between an owner and a lender.
IX-002Practice bank se · 3
Which instrument derives its value from an underlying stock index rather than directly representing company ownership?
A stock-index futures contract is a derivative because its value depends on the underlying index. Remember: Index futures are derivatives rather than direct ownership of each underlying company.
Hint Common mistake: Assuming every financial document is a derivative. Think about a contract whose value depends on something else.
IX-003Practice bank se · 4
Which institution maintains securities in electronic form through its account system?
A depository maintains securities electronically and supports transfers through its account system. Remember: Dematerialised securities are maintained within the depository system.
Hint Common mistake: Confusing the place of trading with the system that holds securities. Think about the infrastructure behind dematerialised holdings.
IX-004Practice bank se · 5
Which financial-market function helps investors convert existing securities into money?
Providing helps investors sell existing securities and convert their holdings into money. Remember: Liquidity concerns the ability to transact in a security.
Hint Common mistake: Equating liquidity with a guaranteed sale price. Recall the term for being able to buy or sell with relative ease.
IX-005Practice bank se · 6
An investor buys already-listed shares from another investor on an exchange. Who receives the sale proceeds, ignoring transaction charges?
The selling investor receives the proceeds because this is a secondary-market sale of existing shares. Remember: Secondary-market trading does not itself raise fresh capital for the issuer.
Hint Common mistake: Assuming every purchase of company shares funds the company. Follow the ownership transfer between the two investors.
IX-006Practice bank se · 7
Which risk most directly concerns a bond issuer failing to make a promised interest payment?
Credit risk concerns the issuer’s ability and willingness to meet promised debt payments. Remember: A missed contractual debt payment is a credit-risk event.
Hint Common mistake: Confusing the issuer’s payment failure with difficulty selling a bond. Identify which party has failed to meet an obligation.
IX-007Practice bank se · 8
A ₹1,000 face-value bond pays an annual coupon of 8%. What is its annual coupon payment?
The annual coupon is ₹80 because the rate applies to face value. Annual coupon = ₹1,000 × 8 ÷ 100 = ₹80. Remember: Coupon payments use face value rather than market price.
Hint Common mistake: Applying the percentage with the wrong decimal position. The coupon rate applies to the bond’s face value.
IX-008Practice bank se · 9
A bond pays ₹90 annually and trades at ₹900. What is its current yield?
The current yield is 10% because annual income is measured against the market price. Current yield = ₹90 ÷ ₹900 × 100 = 10%. Remember: Current yield compares annual coupon income with current market price.
Hint Common mistake: Confusing current yield with the coupon rate or yield to maturity. Compare one year’s income with the price paid today.
IX-009Practice bank se · 10
A company has 2 crore outstanding shares trading at ₹150 each. What is its equity market capitalisation?
Equity market capitalisation is ₹300 crore because all outstanding shares are valued at the market price. Market capitalisation = 2 crore × ₹150 = ₹300 crore. Remember: Market capitalisation values the company’s outstanding equity at market prices.
Hint Common mistake: Using the share price alone as the company’s total equity value. Value every outstanding share at the quoted market price.
IX-010Practice bank se · 11
A company needs funds for a ten-year factory project. Which financing instrument most directly matches this long-term requirement?
A ten-year debenture directly matches the project’s stated long-term funding horizon. Remember: Funding maturity should be considered alongside the asset’s funding horizon.
Hint Common mistake: Choosing short maturity solely because the borrowing is initially available. Compare the project’s horizon with each instrument’s maturity.
IX-011Practice bank se · 12
What mainly distinguishes a depository participant from a depository for an individual account holder?
A depository participant connects investors to the depository’s services through their securities accounts. Remember: The participant is the investor-facing access point to depository services.
Hint Common mistake: Assuming the depository and its participant are identical entities. Think about the entity through which an investor accesses the account system.
IX-012Practice bank se · 13
A private equity investor invests ₹20 crore in new shares at an ₹80 crore pre-money valuation. What post-investment ownership results?
The investor owns 20% because the new funds increase the valuation denominator. Post-money value = ₹80 crore + ₹20 crore = ₹100 crore. Ownership = ₹20 crore ÷ ₹100 crore × 100 = 20%, assuming no other dilution. Remember: Fresh-equity ownership uses the post-money valuation.
Hint Common mistake: Dividing the investment by the pre-money valuation. The new investment becomes part of the company’s post-investment value.
IX-013Practice bank se · 14
An investor buys 200 shares at ₹120 and receives ₹4 dividend per share before selling at ₹132. What is the total return?
The total return is 13.33% because it includes the dividend and the price gain. Initial cost = 200 × ₹120 = ₹24,000. Total gain = 200 × (₹132 − ₹120 + ₹4) = ₹3,200. Return = ₹3,200 ÷ ₹24,000 × 100 = 13.33%, ignoring charges and taxes. Remember: Holding-period return includes both income and .
Hint Common mistake: Ignoring dividends when measuring the investment’s total return. Include both the change in price and the cash received during ownership.
IX-014Practice bank se · 15
Market yields rise after a fixed-rate bond is issued. Its promised payments and credit risk remain unchanged. What happens to its theoretical price?
The theoretical price falls because a higher market yield discounts the same future payments more heavily. Remember: Fixed-rate bond prices and required yields move in opposite directions, other things unchanged.
Hint Common mistake: Assuming an unchanged coupon means an unchanged market price. Consider the present value of the same future payments at a higher required return.
IX-015Liquidity describes how easily a given quantity can be traded.
Aage padhoA capital gain is the gain from selling an asset for more than its eligible cost.
Aage padho