BM0023 - CAPITAL AND MONEY MARKET

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ASSIGNMENT

DRIVE	WINTER 2013
PROGRAM	Bachelor of Commerce in Information System
SUBJECT CODE & NAME	BM0023 - CAPITAL AND MONEY MARKET
SEMESTER	5
CREDITS	4
MARKS	60

Answer all the questions. Each question carries 10 Marks.

1. Explain the term Capital market and discuss the different methods used for raising capital.

Answer : Capital markets are the markets where securities such as shares and bonds are issued to raise medium to long-term financing, and where the securities are traded. The securities might be issued by a company which could issue shares or bonds to raise money. Bonds could also be issued by other entitiies in need of long-term cash, such as regional or national governments. The securities are issued in what is known as the primary market and traded in the secondary market. In the primary market a company would have face to face meetings to place its securities with investors. A company might work with an investment bank who would act as an intermediary and underwrite the offering.

2. Define the term “Stock Exchange”. Briefly discuss the causes of price fluctuations in Equity markets.

Answer : A stock exchange is a form of exchange which provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and dividends. Securities traded on a stock exchange include stock issued by companies, unit trusts, derivatives, pooled investment products and bonds. Stock exchanges often function as "continuous auction" markets, with

3. What do you mean by Listing? Discuss the advantages, limitations, criteria and requirements of listing.

Answer : Listing means admission of securities to dealings on a recognised stock exchange. The securities may be of any public limited company, Central or State Government, quasi governmental and other financial institutions/corporations, municipalities, etc.

The objectives of listing are mainly to : 

4. Write short notes on credit rate agencies giving examples. Describe the factors that are to be considered by these agencies while rating the securities.

Answer : A CRISIL rating reflects CRISIL's current opinion on the relative likelihood of timely payment of interest and principal on the rated obligation. It is an unbiased, objective, and independent opinion as to the issuer's capacity to meet its financial obligations.

So far, CRISIL has rated 30,000 debt instruments, covering the entire debt market.

The debt obligations rated by CRISIL include:

5. Write a short notes on

 (a) Forward contract

Answer : A forward contract is an agreement between two parties to buy or sell an asset (which can be of any kind) at a pre-agreed future point in time at a pre-agreed price. A futures contract is a standardized contract, traded on a futures exchange, to

(b) Hedging

Answer : Hedging means reducing or controlling risk. This is done by taking a position in the futures market that is opposite to the one in the physical market with the objective of reducing or limiting risks associated with price changes.

(c) Arbitrage

Answer : In economics and finance, arbitrage is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices. When used by academics, an arbitrage is a transaction that involves no negative cash flow at any probabilistic or temporal state and a positive cash flow in at least one state; in simple terms, it is the possibility of a risk-free profit after transaction costs. For instance, an

d)Option Contracts

Answer : An options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a later date at an agreed upon price.  Options contracts are often used in securities, commodities, and real estate transactions.

How it works/Example:

There are several types of

6. Briefly discuss the financial markets in India. Distinguish between capital & Money markets.

Answer : What is India Financial Market? What does the India Financial market comprise of? It talks about the primary market, FDIs, alternative investment options, banking and insurance and the pension sectors, asset management segment as well. With all these elements in the India Financial market, it happens to be one of the oldest across the globe and is definitely the fastest growing and best among all the financial markets of the em

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