NISM XII Understanding Securities Markets — Practice Questions
Practise the opening chapter of the Securities Markets Foundation exam: what securities markets do, the role of price as a signal, market participants and regulators, and how market performance is measured.
62 questions on Securities Markets & Performance in the ScoreSetu bank — each with a detailed explanation and, where useful, a memory hook.
What this topic covers
- Functions of the securities market
- Price discovery and signalling
- Participants and regulators
- Measuring market performance
Free sample questions
1. ______ evaluates a debt security and provides a professional opinion about the ability of the issuer to meet the obligations for payment of interest and return of principal.
- A. Credit rating agencies ✅
- B. Stock brokers
- C. Bankers to an issue
- D. Registrars of an issue
Answer: A — Credit rating agencies
Why: Credit rating agencies evaluate a debt security to provide a professional opinion about the ability of the issuer to meet the obligations for payment of interest and return of principal as indicated in the security. They use rating symbols to rank debt issues, which enable investors to assess the default risk in a security.
💡 CREDIT RATING agencies judge issuer's ability to pay interest/principal (rank default risk).
2. State True or False - The Price to Book Value - PBV ratio compares the market price of the stock with its book value.
- A. True ✅
- B. False
Answer: A — True
Why: The PBV ratio compares the market price of the stock with its book value. It is computed as: Market price per share divided by the Book Value per share.
💡 TRUE. Formula: PBV = Market price per share / Book value per share.
3. Which organizations invest in large volumes in the securities market and have specialized knowledge and skills in investing ?
- A. Custodians
- B. Institutional investors ✅
- C. Depositories
- D. All of the above
Answer: B — Institutional investors
Why: Institutional investors are organizations that invest large volumes and have specialized knowledge and skills in investing. For eg- Mutual Funds.
💡 INSTITUTIONAL investors = large-volume + specialized skill (e.g. mutual funds).
Practise all 62 Securities Markets & Performance questions
Plus the full 566-question NISM XII bank and real-feel mock exams.