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Tamilnadu Samacheer Kalvi 12th Commerce Solutions Chapter 7 Stock Exchange

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Samacheer Kalvi 12th Commerce Stock Exchange Textbook Exercise Questions and Answers

I. Choose the Correct Answer

Question 1.
_______ is the oldest stock exchange in the world.
(a) London Stock Exchange
(b) Bombay Stock Exchange
(c) National Stock Exchange
(d) Amsterdam Stock Exchange
Answer:
(d) Amsterdam Stock Exchange

Question 2.
There are ______ stock exchanges in the country.
(a) 21
(b) 24
(c) 20
(d) 25
Answer:
(b) 24

Question 3.
Stock exchanges deal in ______
(a) Goods
(b) Services
(c) Financial Securities
(d) Country’s Currency
Answer:
(c) Financial Securities

Question 4.
Stock exchange allow trading in ______
(a) All types of Shares of any Company
(b) Bonds issued by the Govt
(c) Listed Securities
(d) Unlisted Securities
Answer:
(c) Listed Securities

Question 5.
Jobbers transact in a stock exchange
(a) For their Clients
(b) For their Own Transactions
(c) For other Brokers
(d) For other Members
Answer:
(b) For their Own Transactions

Question 6.
A pessimistic speculator is ______
(a) Stag
(b) Bear
(c) Bull
(d) Lame Duck
Answer:
(b) Bear

Question 7.
An optimistic speculator is ______
(a) Bull
(b) Bear
(c) Stag
(d) Lame Duck
Answer:
(a) Bull

Question 8.
A bull operator believes in ______
(a) Increase in Prices
(b) Decrease in Prices
(c) Stability in Prices
(d) No change in Prices
Answer:
(a) Increase in Prices

Question 9.
______ means the price at which securities are bought and sold are recorded and made public.
(a) Market Quotations
(b) Trade Quotations
(c) Business Quotations
(d) Buyers Quotations
Answer:
(a) Market Quotations

Question 10.
The rules and regulations of Stock exchange is framed by ______ guide lines.
(a) RBI
(b) Central Government
(c) SEBI
(d) BSE
Answer:
(c) SEBI

II. Very Short Answer Questions

Question 1.
What is meant by Stock Exchange?
Answer:
Stock Exchange is an organized market for the purchase and sale of industrial and financial security. It is also called stock market or share market.

Question 2.
Define Stock Exchange.
Answer:
According to Husband and Dockerary, “Stock exchanges are privately organized markets which are used to facilitate trading in securities.”

Question 3.
Write any 5 Stock Exchanges in India.
Answer:

  1. The Bombay Stock Exchange
  2. Bangalore Stock Exchange Ltd
  3. The Madras Stock Exchange Ltd
  4. The Hydrabad Stock Exchange Ltd
  5. The Cochin Stock Exchange Ltd

Question 4.
What is meant by Remiser?
Answer:
Remiser is an agent of a member of a stock exchange. He obtains business for his principal i.e the member.

Question 5.
Who is called a Broker?
Answer:
Broker is a commission agent. He acts as an intermediary between buyers and sellers of securities. He charges a commission for his services from both the parties.

Question 6.
What are the types of Speculators?
Answer:
Speculators in a stock market are of different types. They are named on the basis of animals behaviour.
They are:

  1. Bull
  2. Bear
  3. Stag
  4. Lame duck

Question 7.
What is meant by Commodity Exchange?
Answer:
A commodity exchange is an exchange where commodities are purchased and sold. Commodities are listed here: Metals, agricultural products

Question 8.
Mention the recent development in Stock Exchange.
Answer:
The structure of stock market in India has undergone a vast change with developments.
They are follows:

  1. National Stock Exchange of India Limited (NSE)
  2. Stock Holding Corporation of India Limited (SHCIL)
  3. National Clearing and Depository System (NCDS)
  4. Securities Trading Corporation of India (STCI)
  5. National Securities Depository Limited (NSDL)

Question 9.
What is the stock trading time in India?
Answer:
The stock trading time in India for equity market is between 9.15 am to 3.30 am from Monday to Friday. Saturdays and Sundays were holiday.

Question 10.
Explain Dalai Street.
Answer:
Dalai Street is an area in Mumbai, where the Bombay Stock exchange is located. The literal translation of Dalai in Marathi is a broker or intermediary.

III. Short Answer Questions

Question 1.
What are the limitations of Stock exchange?
Answer:

  1. Lack of uniformity and control of stock exchanges.
  2. Absence of restriction on the membership of stock exchanges.
  3. Failure to control unhealthy speculation.

Question 2.
Explain Bull and Bear.
Speculators in a stock market are of different types based on animals behaviour.
They are:

  1. Bull: A Bull or Tejiwala is an operator who expects a rise in prices of securities in the future. He purchases the securities expecting price of rise in future.
  2. Bear: A bear or Mandiwala speculator expects prices to fall in future and sells securities at present with a view to purchase them at lower price.

Question 3.
Explain Stag and Lame Duck.
Answer:

  1. Stag: A stag is a cautious speculator in the stock exchange. He applies for shares in new companies and expects to sell them at a premium.
  2. Lame Duck: When a bear finds it difficult to fulfill his commitment, he is said to be struggling like a lame duck.

Question 4.
Explain National Stock Market System. (NSMS)
Answer:
National stock market system was advocated by the High Powered Group. It is headed by Shri. Pherwani (popularly known as Pherwani Committee). At present the National Stock Market comprises the following:

  1. National Stock Exchange of India Limited (NSE)
  2. Stock Holding Corporation of India Limited (SHCIL)
  3. Securities Trading Corporation of India (STCI)

Question 5.
Explain National Stock Exchange. (NSE)
Answer:
National Stock Exchange was incorporated in November, 1992. It uses satellite link to spread trading throughout the country. Through computer network, members’ orders for buying and selling within prescribed price are matched by central computer.

IV. Long Answer Questions

Question 1.
Explain the functions of Stock Exchange.
Answer:

  1. Ready and Continuous Market: Stock exchange helps the investors to sell his securities easily. And also he can convert his cash into securities.
  2. Correct Evaluation of Securities: The prices at which securities are bought and sold are recorded and informed to the public. These prices are called “market quotations”
  3. Protection to Investors: All dealings in a stock exchange are in accordance with well- defined rules and regulations. Any malpractice will be severely punished.
  4. Proper Channelisation of Capital: People like to invest in the shares of companies which yield good profits. Also people invest in the companies which are giving good dividends.
  5. Facilities for Speculation: Speculation is an integral part of stock exchange operations. As a result of speculation, demand for and supply of securities are equalized.

Question 2.
Explain the features of Stock Exchange.
Answer:
There are various features of a stock exchange. They are given below:

  1. Market for Securities: Stock exchange is a market, where securities of corporate bodies, government companies are bought and sold.
  2. Deals in Second Hand Securities: It deals with shares, debentures bonds and securities already issued by the companies.
  3. Regulates Trade in Securities: Stock exchange does not buy or sell any securities on its own account. It regulates the trade activities so as to ensure free and fair trade.
  4. Allows Dealings only in Listed Securities: In the stock exchange only listed securities are purchased and sold. Unlisted securities cannot be traded in the stock exchange.
  5. Association of Persons: A stock exchange is an association of persons or body of individuals which may be registered or unregistered.

Question 3.
Explain the Benefits of Stock Exchange.
Answer:
The benefits of Stock Exchange are classified into benefits to the Community, Company and Investors.
Benefits to the Community:

  1. Economic Development: It increases the economic development by ensuring steady flow of savings for production.
  2. Fund Raising Platform: It enables the well-managed companies to raise funds by issue of shares.

Benefits to the Company:

  1. Enhances Goodwill or Reputation: Companies whose shares are quoted on a stock exchange enjoy greater goodwill and credit standing.
  2. Raises huge funds: Stock exchange helps the companies to raise huge funds by issue of shares and debentures.

Benefits to Investors:

  1. Liquidity: Stock exchange helps to convert his shares into cash quickly.
  2. Investor protection: The stock exchange safeguards, investor’s interest by following strict rules and regulations.

Question 4.
Distinguish between Stock Exchange and Commodity Exchange.
Answer:

Stock Exchange Commodity Exchange
(i) Meaning: Stock Exchange is an organised market for purchase and sale of industrial and financial securities. A commodity exchange is an exchange where commodities are purchased and sold. E.g.: Gold, Silver, Rice, Wheat “
(ii) Function: Providing easy marketability. Offering hedging or price insurance services.
(iii) Object: It is facilitating capital formation. It will facilitate goods flow through risk reduction.
(iv) Participants: Investors and Speculators are participating in stock exchange. Producers, dealers, traders are involved in the commodity exchange.
(v) Articles traded: Industrial securities such as stocks and bonds and government securities. Only durable and graded goods are traded in this.

Question 5.
Explain Lombard street and Wall street.
Answer:
Lombard Street: Lombard Street is in London. It is a street notable for its connections with the merchants, banking and insurance industries of London. From bank junction, where nine . streets converge by the bank of England, Lombard Street runs southeast for a short distance.

Wall Street: Wall Street is a street in New York. It is the original home of the New York Stock exchange. Also it is the historic headquarters of the largest U.S. brokerages and investment banks.

Wall Street is also used as a collective name for the financial and investment community.

Samacheer Kalvi 12th Commerce Stock Exchange Additional Questions and Answers

I. Choose the Correct Answer

Question 1.
Match List I with List II and select the correct answer using the codes given below:

List -1 List – II
(i) Remiser (1) Commission agent
(ii) Authorised Clerk (2) Agent of a member
(iii) Broker (3) Security Merchant
(iv) Jobber (4) Employee

Codes:

(i) (ii) (iii) (iv)
(a) 4 3 2 1
(b) 2 4 1 3
(c) 3 2 1 4
(d) 1 2 3 4

Answer:
(b) 2,4, 1, 3

Question 2.
Which is not a foreign Stock exchange?
(a) London Stock Exchange
(b) Bombay Stock Exchange
(c) Tokyo Stock Exchange
(d) New York Stock Exchange
Answer:
(b) Bombay Stock Exchange

Case Study

Ramesh and Asaladeepesh are good friends. Ramesh is very god-fearing kind, while Asaladeepesh was an enterprising person, having practical in approach. Read the ” following conversation.

Ramesh : Hi,Deepesh! What are you doing?
Asaladeepesh: Hi, I am reading the newspaper – financial market page that gives us
information about the shares price.
Ramesh : Shares, that is an area of big gambles.
Asaladeepesh: No, not really! You must understand how it works.
Ramesh : Frankly speaking, I think this Capital market is all a gambling game and I don’t see any use of them.
Asaladeepesh :No, you are seriously mistaken; you do not know the importance of capital market. I will tell how it is needed for an individual and an economy.

You are required to play the role of Asaladeepesh and continue the conversation.
Solution:
Ramesh : Ok, you tell me the importance of capital.
Asaladeepesh : Capital is needed for an individual to commence business. Also it is needed to develop the society.
Ramesh : What is capital?
Asaladeepesh : Capital is the finance needed to do the business.
Ramesh : How the capital can be obtained?
Asaladeepesh : Capital may be introduced by self or for the large amount of capital one can issue shares and debentures.
Ramesh : What is meant by share?
Asaladeepesh : Share means a unit or a part of share capital.
Ramesh : What is the income for the shares purchased?
Asaladeepesh :For purchasing shares, the company can declare dividend from the profit earned by the company.
Ramesh : What are the types of shares?
Asaladeepesh : The shares may be of equity shares and preference shares.
Ramesh : What is meant by debentures?
Asaladeepesh : Debenture may be a document for accepting loan from the public.
Ramesh : How the shares can be obtained, if not purchased from the original issue?
Asaladeepesh : You can get the shares from the stock exchange by contacting a broker.

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