Financial Markets- Level 1

The primary market is the market where companies can raise funds by issuing new securities, such as stocks or bonds, directly to investors. This market allows companies to raise capital for business expansion, research and development, or other financial needs. In contrast, the secondary market is where these securities are traded among investors. Therefore, the statement that the primary market is the market in which the company can raise funds is true.

The initial public offering (IPO) of a company refers to the process of offering shares of a private corporation to the public in a new stock issuance. This process is typically done with the assistance and collaboration of an investment banker. The investment banker helps the company determine the offering price, underwrites the shares, and facilitates the marketing and distribution of the shares to potential investors. Therefore, it is true that an IPO of a company is done through a collaboration with an investment banker.

NSE options and futures contracts expire on the last Thursday of every month. This is a common practice in many financial markets, where contracts are typically settled or expired on specific days of the month. By having a consistent expiration date, it allows for easier planning and coordination for market participants.

In the primary market, the transaction of securities is typically one directional. This means that the securities are issued and sold by the issuer to the investors. The investors purchase the securities directly from the issuer, and there is no secondary market trading involved. Therefore, the statement that the transaction of securities in the primary market is two directional is incorrect.

The given statement is incorrect. DRHP (Draft Red Herring Prospectus) is a document filed by a company with the regulatory authority when it plans to go public through an initial public offering (IPO). It provides information about the company's business, financials, risks, and objectives, but it does not include details like stop loss, targets, or investment required. Therefore, the correct answer is false.

A circuit limit is a predetermined percentage change in the price of a stock that triggers a temporary halt in trading. This measure is put in place to prevent extreme volatility and protect investors. In this case, the correct answer is 15% because it is not a circuit limit for a stock. The other options, 5%, 10%, and 20%, are all commonly used circuit limits that determine when trading should be temporarily halted.

The money market is not considered a type of financial market because it is not involved in trading long-term securities like stocks and bonds. Instead, the money market deals with short-term borrowing and lending of funds, typically for periods of one year or less. It includes activities such as trading in Treasury bills, commercial papers, and certificates of deposit. Unlike the other options listed, the money market focuses on providing liquidity and short-term financing for financial institutions, corporations, and governments.