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Class 12 AHSEC 2024 Finance Question Paper Solved English Medium
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FINANCE
2024
FINANCE/BANKING OLD QUESTION PAPER SOLVED
1. (a) When was the RBI established?
Ans: The Reserve Bank of India was established on April 1, 1935.
(b) Which is the first development bank of India?
Ans: The Industrial Finance Corporation of India (IFCI) was India’s first development bank, established in 1948.
(c) Money market is the market for short-term funds. (State whether true or false).
Ans: True.
(d) What is meant by the rate of exchange in foreign exchange market?
Ans: The foreign exchange market also known as forex, FX, or the currencies market. Foreign Exchange Rate is defined as the price of the domestic currency with respect to another currency. The exchange rate is also regarded as the value of one country’s currency in relation to another currency.
(e) What is meant by merchant bank?
Ans: Merchant banks are institutions that provide loans and capital for business enterprises. Merchant banks are high level professionals in international trade, which makes merchant banks specialists in operating with big corporations.
(f) Name two subsidiaries of SBI.
Ans: SBI Life Insurance Company Limited and SBI Cards and Payment Services Limited (SBI Card) is a subsidiary of State Bank of India.
2. Write two advantages of underwriting.
Ans: Two advantages of underwriting are:
(i) Underwriting helps to set fair borrowing rates for loans, establish appropriate insurance premiums, and create a market for securities by accurately pricing investment risk.
(ii) Underwriting helps to ensure that customers are properly classified so that they pay the right amount according to their level of risk.
3. What is meant by proportional reserve system method of issuing note?
Ans: According to proportional reserve system, out of the reserves, certain percentage or proportion has to be held in the form of precious metals like gold. The methods for note issuing are simple deposit system, maximum fiduciary system, minimum reserve system, proportional reserve system and fixed fiduciary system. The remaining portion is not backed but relies on the government’s creditworthiness, ensuring stability and flexibility in currency issuance.
4. Write two features of foreign exchange market.
Ans: Two features of foreign exchange market are:
(i) It is a decentralized market that operates 24 hours a day, 5 days a week, across multiple time zones.
(ii) The foreign exchange market is the marketplace in which participants are able to sell, purchase, exchange and theorize on currencies.
5. Give the meaning of factoring.
Ans: Factoring is a type of finance in which a business would sell its accounts receivable (invoices) to a third party to meet its short-term liquidity needs. The factor provides immediate cash to the business, manages the collection process, and assumes the credit risk, helping improve cash flow and reduce administrative burdens.
6. Write three objectives of IFCI.
Ans: Three objectives of the Industrial Finance Corporation of India (IFCI) are:
(i) The corporation grants loans and advances to industrial concerns. Offer financial assistance for industrial growth and modernization in India.
(ii) Encourage projects that create job opportunities and contribute to economic development. Granting of loans both in rupees and foreign currencies.
(iii) The corporation underwrites the issue of stocks, bonds, shares etc.
7. Write three differences between lease and hire purchase.
Ans:
| Basic of differences | Lease | Hire purchase |
| Meaning | A lease is a legal, binding contract outlining the terms under which one party agrees to rent property owned by another party. | Hire purchase is an arrangement made while buying expensive goods. The buyer can use the item while they are making payments, but the seller retains ownership until all payments are made. |
| Tax Treatment | Lease payments are often treated as expenses for tax purposes, which can result in tax benefits for the lessee. | he hirer may claim depreciation on the asset, and the interest portion of the installment is often deductible for tax purposes. The asset is considered owned by the hirer. |
| Objectives | One of the major reasons for acquiring an asset on lease is that the lease offers the advantage of placing the risk of obsolescence on the shoulders of the owner. | The objective of hire purchase is to enable individuals or businesses to acquire assets by spreading the cost over time through installment payments. |
8. State the minimum reserve system of note issue.
Ans: The Minimum Reserve System is a method of issuing currency notes where the issuing authority, such as a central bank, maintains a minimum reserve of gold and foreign securities. In India, currency notes are printed in accordance with the Minimum Reserve System (MRS). This technique has been in use in India since 1956. The methods for note issuing are simple deposit system, maximum fiduciary system, minimum reserve system, proportional reserve system and fixed fiduciary system.
9. Write three functions of NABARD.
Ans: The functions of NABARD are:
(i) NABARD promotes integrated rural development by providing credit to agriculture, small-scale industries, village industries, and handicrafts.
(ii) NABARD provides financial support for agriculture, rural development, and small-scale industries.
(iii) NABARD implements policies and schemes to enhance agricultural productivity and rural livelihoods.
OR
Briefly discuss the structure of Indian money market.
Ans: The structure of Indian money market are:
(i) Call Money Market: This is the market for overnight borrowing and lending of funds between commercial banks, with interest rates determined by demand and supply. The loans in the call money market are very short, usually lasting no longer than a week.
(ii) Treasury Bills (T-Bills): Treasury Bill is a money market instrument is issued by the Government of India.These are short-term securities issued by the Government of India with maturities of 91, 182, and 364 days. They are sold through auctions and provide a safe investment option.
(iii) Discount Market: The market where finance is provided by discounting of commercial bills is called as commercial bills market. This segment involves the buying and selling of bills of exchange, promissory notes, and other short-term instruments, with discounts reflecting the interest on the funds.
10. Write five advantages of credit rating.
Ans: Following are the advantages of credit rating:
(i) A high credit rating enhances an individual’s or company’s ability to secure loans at favorable terms and lower interest rates, as it signals financial reliability to lenders.
(ii) Credit card issuers report account details (such as the percentage of credit utilized, timeliness of payments and amount of time the line of credit has been open) to major credit bureaus every month. This gives the card owner a regular opportunity to add positive information to credit reports, which will improve credit standing.
(iii) A strong credit rating can enable companies to access capital easily, supporting expansion, research, and development initiatives.
(iv) Credit cards often offer rewards for money spent on the card by offering a percentage of cash back, miles to use for airline tickets or points to be redeemed for travel, dining or cash. These rewards are used as a marketing feature to attract users to the card, but can lead to real savings on trips, merchandise, gift cards or credit card bills if the card is paid off every month.
(v) Credit ratings can also provide an objective measure of risk, helping lenders and investors assess the likelihood of repayment and making informed decisions.
Or
Write the advantages of investing in mutual funds.
Ans: The advantages of investing in mutual funds are:
Professional Management: Mutual funds are managed by professional asset managers who have years of experience in the financial markets. They have the expertise to make informed investment decisions and help investors earn a profit.
Risk Diversification: Diversification helps to cushion the impact of market volatility. By holding a diversified portfolio, the impact of a poor-performing investment is minimized, ensuring that the overall risk is lower compared to investing in individual securities.
Tax Benefits: Tax efficient mutual funds are designed to minimize the tax liabilities on your investment income, making them an attractive option for investors looking to optimize their after-tax gains. Mutual funds offer tax benefits to investors.
Liquidity: Mutual funds are highly liquid investments, which means that investors can easily buy and sell their units at any time.
Low Cost: Low Cost in mutual funds makes them an affordable investment option. They provide professional management, diversification, and access to a variety of assets at a lower cost compared to individual investing.
11. What are the promotional functions of RBI?
Ans: Following are the promotional functions of RBI:
(i) Issue of Currency Notes: The RBI has the sole right or authority or monopoly of issuing currency notes except one rupee note and coins of smaller denomination. The methods for note issuing are simple deposit system, maximum fiduciary system, minimum reserve system, proportional reserve system and fixed fiduciary system.
(ii) Banker to other Banks: The Reserve Bank of India (RBI) acts as the “Banker to other Banks,” providing essential services like clearing and settlement, managing the exchange of funds, and ensuring smooth operations within the banking system. Letting banks maintain their accounts with the Reserve Bank for regular reserve requirements and maintenance of transaction balances as per the rule.
(iii) Banker to the Government: The RBI being the apex monitory body has to work as an agent of the central and state governments. It performs various banking function such as to accept deposits, taxes and make payments on behalf of the government.
(iv) Exchange Rate Management: It is an essential function of the RBI. In order to maintain stability in the external value of rupee, it has to prepare domestic policies in that direction. Also, it needs to prepare and implement the foreign exchange rate policy which will help in attaining the exchange rate stability
(v) Credit Control Function: Commercial banks in the country create credit according to the demand in the economy. But if this credit creation is unchecked or unregulated then it leads the economy into inflationary cycles
Or
Write the defects of Indian money market.
Ans: The Indian money market is inadequately developed, loosely organised and suffers from many weaknesses.
Major defects are discussed below:
(i) Dichotomy between Organised and Unorganised Sectors: The most important defect of the Indian money market is its division into two sectors:
(a) The organised sector. and
(b) The unorganised sector.
There is little contact, coordination and cooperation between the two sectors. In such conditions it is difficult for the Reserve Bank to ensure uniform and effective implementations of monetary policy in both the sectors.
(ii) Absence of Cooperation amongst the Members of the Money Market: The lack of cooperation and coordination among the various participants in the money market, including banks, financial institutions, and the government, hampers the smooth functioning of the market. Without effective collaboration, the market may experience inefficiencies, liquidity problems, and a fragmented structure.
(iii) Insufficient Funds or Resources: The Indian economy with its seasonal structure faces a frequent shortage of financial recourse. Lower-income, lower savings, and lack of banking habits among people are some of the reasons for it.
(iv) Shortage of Capital: Indian money market generally suffers from the shortage of capital funds. The availability of capital in the money market is insufficient to meet the needs of industry and trade in the country.
The main reasons for the shortage of capital are:
(a) low saving capacity of the people.
(b) inadequate banking facilities, particularly in the rural areas. and
(c) undeveloped banking habits among the people.
(v) Absence of Bill Market: The existence of a well-organised bill market is essential for the proper and efficient working of money market. Unfortunately, in spite of the serious efforts made by the Reserve Bank of India, the bill market in India has not yet been fully developed.
12. Write a note on the wholesale market of foreign exchange market.
Ans: The wholesale foreign exchange market, also known as the interbank market, is where major financial institutions, central banks, corporations, and governments trade large volumes of currencies. The international business context requires trading and investing in assets denominated in different currencies. Foreign assets and liabilities add a new dimension to the risk profile of a firm or an investor’s portfolio: foreign exchange risk. This chapter has two goals. First, this chapter introduces the terminology used in foreign exchange markets. Second, this chapter presents the instruments used in currency markets. participants include banks, hedge funds, and multinational companies, engaging in spot, forward, and swap transactions to manage currency risks, conduct international trade, or speculate on currency movements. Prices are determined by supply and demand, influenced by economic data, geopolitical events, and market sentiment. The wholesale forex market underpins the global economy, enabling smooth cross-border financial transactions. The forex market operates primarily as an over-the-counter (OTC) market, meaning transactions happen electronically through networks of banks, financial institutions, and forex brokers.
Or
What are the advantages of the private placement method of the new issue market?
Ans: The advantages of the private placement method of the new issue market are:
Cost-Effective: Private placement involves lower costs compared to public issues, as it avoids expenses related to underwriting, marketing, and regulatory compliance. The relevance of cost-effectiveness analysis (CEA) lies in its ability to guide resource allocation in a way that maximizes the benefit of investments. it aims to identify which option provides the best results for the least financial investment.
Quick Fundraising: The process is faster since it involves fewer regulatory formalities and a limited number of investors. The Securities and Exchange Board of India (SEBI) enacted this rule to prevent enterprises from relying on foreign financing.
Confidentiality: Confidentiality refers to the duty of an individual or organization to refrain from sharing confidential information without the express consent of the other party. Companies can keep financial and operational details private, as the disclosure requirements are less stringent than for public issues.
Targeted Investors: The company can select specific investors, such as institutional buyers or high-net-worth individuals, ensuring better alignment of interests. Investor targeting benefits companies by increasing access to capital, reducing volatility, taking control of the narrative, and enabling the long-term growth opportunities essential for weathering poor economic conditions.
Flexible Terms: Financial flexibility refers to a firm’s ability to adapt its financial resources and structure to meet changing circumstances and opportunities. Issuers can negotiate terms directly with investors, providing greater flexibility in pricing, repayment schedules, and covenants. It encompasses the capacity to raise capital, adjust expenditures, and maintain liquidity in response to both internal and external pressures.
Reduced Market Risk: As shares are sold privately, there is no need for market pricing or concerns about under subscription. To reduce this risk, you can use risk management strategies like diversification, investing in safer assets, and regular monitoring.
13. White the functions of merchant banking.
Ans: The functions of merchant banking are:
(i) Merchant banks provide financial and advisory services to help corporate clients conduct business.
(ii) Ensures the success of new issues by subscribing to securities that are not fully subscribed by the public.
(iii) Merchant banks can also provide more creative forms of financing. They can help corporations issue securities through private functions which requires less regulatory disclosure and are sold to sophisticated investors.
(iv) If a multinational corporation operates in many different countries, a merchant bank can finance business operations in all of those countries and manage.
(v) Provides guidance on mergers, acquisitions, takeovers, and corporate restructuring.
(vi) Offers financial, managerial, and operational advice to improve the performance and profitability of companies.
(vii) Manages public issues of securities, including drafting prospectuses, pricing, and compliance with regulatory requirements.
14. Discuss the objectives of State Finance Corporations (SFC).
Ans: The objectives of State Finance Corporations (SFC) are:
(i) SFCs aim to foster balanced regional development by financing industries in underdeveloped areas.
(ii) It grants loan and advances to industrial concerns that are repayable within the maximum period of 20 years.
(iii) Assists in raising funds for new projects, expansion, or diversification through loans, equity, or debentures.
(iv) Manages public issues of securities, including drafting prospectuses, pricing, and compliance with regulatory requirements.
(v) Guarantees deferred payments for purchase of capital goods with India.
(vi) Offers financial, managerial, and operational advice to improve the performance and profitability of companies.
(vii) It subscribes the shares and debentures of industrial concerns and it underwrites the shares and debentures of the industrial concerns.
(viii) It acts as an agent of the State and central Government.
(ix) Manages investments for clients to maximize returns and minimize risks.
(x) Offers strategic advice and assistance in mergers, acquisitions, and takeovers.
15. What are the advantages of hire purchase to the seller?
Ans: The advantages of hire purchase to the seller are:
(i) Hire purchase allows customers who may not have the immediate financial capacity to pay upfront to buy products, thus increasing the seller’s sales.
(ii) Rather than one big lump sum, you can spread the purchase cost of high ticket items. These include items such as cars, where you can pay over a period of 3 to 5 years typically.
(iii) The seller retains ownership of the product until the buyer completes payment, ensuring the asset is secured until the purchase is fully paid.
(iv) As the hire purchaser, you’ll own the asset after paying the last instalment which can make it a favourable alternative to a lease.
(v) The interest rate on hire purchases is fixed for the duration of the agreement. This is regardless of any changes the Bank of England makes to the base rate.
16. Discuss the importance of venture capital.
Ans: The importance of venture capital are:
(i) Funding for High-Growth Potential Startups: Venture capital offers essential funding for startups with high growth potential, enabling them to scale and achieve their goals. It allows startups to leverage resources, attract talent, and compete in dynamic markets, ultimately driving economic growth and fostering technological advancements.
(ii) Growth and Expansion: Venture capital investment aids tremendously in the expansion of businesses, enabling companies to test new markets, develop new products, and hire talent to propel ahead in a highly competitive market. Investors seek startups that show scalable business models, market demand, and the ability to grow rapidly.Success in growth and expansion leads to higher valuations, attracting further funding and enabling long-term success.
(iii) Job Creation: Job creation plays a crucial role in venture capital by fostering economic growth and reducing unemployment. Companies that are funded by venture capitalists help create jobs, and as a whole contribute to economic growth and development.
(iv) Innovation and Risk-Taking: Innovation and risk-taking are crucial in venture capital as they drive the creation of groundbreaking ideas and technologies. They strongly encourage innovation and risk- taking, supporting entrepreneurs in developing groundbreaking technologies and disruptive business models. Their motto is always to think outside the box. This dynamic fosters growth, enables market disruption, and contributes to long-term success in competitive markets.
(v) Mentorship and Guidance: Mentorship and guidance play a crucial role in venture capital by providing startups with valuable expertise, strategic direction, and networking opportunities. Venture capitalists often provide valuable guidance mostly from their own experiences, mentorship, and industry connections to portfolio companies.
(vi) Network Effects: Venture capital firms play a crucial role when it comes to networking. They connect startups with other portfolio companies, partners, and industry players, fostering collaboration and synergies. In venture capital, network effects are crucial as they can lead to rapid growth, increased customer loyalty, and competitive advantage, making companies more attractive for investment due to their scalability and long-term potential.
(vii) Economic Growth: Economic growth is crucial for venture capital as it creates an environment for businesses to expand, generating higher returns. Venture capital investment contributes to GDP growth, startups drive innovation, productivity, and competitiveness.
(viii) Return on Investment: Venture capital investments can yield significant returns for investors, making it an attractive asset class. A high ROI indicates successful growth, while a low ROI signals risks or underperformance, influencing future investments.
Or
What are the instruments of the money market? Discuss.
Ans: The instrument of the money market are:
(i) Certificate of Deposit: These certificates are issued directly by a commercial bank at a discounted rate, and their tenure usually ranges from seven days to one year. CDs function similarly to a bank fixed deposit, except for the higher negotiating factor and higher liquidity.
(ii) Treasury Bills: Treasury bills are generally considered to be free of default risk because they are obligations of the federal government. he bill market is a sub-market of the money market in India.
(iii) Commercial Papers: Commercial paper is an unsecured, short-term debt instrument issued by corporations. It’s typically used to finance short-term liabilities such as payroll, account payable, and inventories. Commercial paper involves a specific amount of money that is to be repaid by a specific date.
(iv) Repurchase Agreements: A repurchase agreement (repo) is a form of short-term borrowing for dealers in government securities. For a repo, a dealer sells government securities to an investor, usually overnight, and buys them back the following day at a slightly higher price.
(v) Banker’s Acceptance: A banker’s acceptance (BA) is a negotiable piece of paper that functions like a post-dated check. A bank rather than an account holder guarantees the payment. Banker’s acceptances are also known as bills of exchange.
17. What are the advantages of capital market? Discuss.
Ans: The advantages of capital market are:
(i) Access to Capital: Capital markets allow traders to buy and sell stocks and bonds, and enable businesses to raise financial capital to grow. Companies can raise funds through the issuance of stocks and bonds, enabling them to finance expansion, research, and development.
(ii) Liquidity: Capital markets provide investors with the ability to buy and sell securities easily, offering liquidity that can attract more investors. The most liquid asset of all is cash itself.
(iii) Price Discovery: Capital markets help establish the prices of securities through supply and demand dynamics, providing transparent pricing mechanisms. In banking, this mechanism ensures that financial instruments like stocks, bonds, and derivatives are priced fairly, promoting transparency, efficient trading, and optimal resource allocation.
(iv) Investment Opportunities: Investors can diversify their portfolios by investing in a wide range of financial instruments, including stocks, bonds, and derivatives. Investors in the capital market engage in various types of investments, including equities (stocks), fixed-income securities (bonds and debentures), and government-backed securities.
(v) Economic Growth: This facilitates job creation, infrastructure development, and industrial growth, contributing to overall economic prosperity. By channeling funds from savers to businesses, capital markets contribute to economic growth and development.
(vi) Foreign Investment: Capital markets attract foreign investments, which bring in foreign exchange and support economic stability. It involves cash flows moving from one country to another to execute the transaction.
Or
Discuss the functions of modern commercial bank.
Ans: The functions of modern commercial bank are:
(i) Accepting Deposits: A commercial bank accepts deposits in the form of current, saving and fixed deposits .Banks provide a safe place for individuals and businesses to deposit their money, which can be withdrawn when needed.
(ii) Providing Loans: Commercial banks provide bank loans. These loans are the amount of money a bank presents to a borrower at a characterized loan fee for a decent period. Banks lend money to individuals and businesses for various purposes, such as home mortgages, business expansion, or personal loans.
(iii) Investment Services: Banks also provide investment products like mutual funds, stocks, and bonds, helping customers grow their wealth.
(iv) Currency Exchange: Commercial banks facilitate currency exchange by providing services to convert one currency into another. Commercial banks facilitate currency exchange by buying and selling foreign currencies for individuals and businesses, enabling international trade, travel, and remittances while ensuring compliance with foreign exchange regulations.
(v) Credit Creation: By providing loans from the deposited funds, banks create credit in the economy, increasing the purchasing power of individuals and businesses and stimulating economic activity.
18. Explain the characteristics of non-banking financial institution.
Ans: The characteristics of non-banking financial institution are:
(i) Investment Focus: Many NBFIs primarily focus on long-term investments and provide funding to sectors like infrastructure, housing, and small businesses.
(ii) Lack of Banking License: NBFIs do not hold a banking license and are not allowed to accept demand deposits from the public. RBI does not guarantee deposits offered by NBFCs, nor are the deposits provided by insurance.
(iii) Risk Management: They generally have more flexibility in terms of risk management and are able to offer financial products tailored to specific customer needs, including higher-risk ventures. Through products like insurance, NBFIs offer risk management solutions to individuals and businesses.
(iv) Profit-Oriented: NBFIs aim to generate profits by offering financial services and charging fees, interest, or commissions on their products. Companies with a profit-oriented approach focus on maximizing revenues, minimizing costs, and enhancing efficiency to achieve financial success.
(v) Risk Management: Through products like insurance, NBFIs offer risk management solutions to individuals and businesses.
Or
Explain briefly about the different types of crossing of cheques with suitable examples.
Ans: There are three types of crossing of cheques:
(i) General Crossing: In general crossing, the cheque is crossed with two parallel lines without any specific bank’s name mentioned between them. The drawer may also write words like “and company” or “& Co” between the lines, or “not negotiable”. It provides a level of security by ensuring that the cheque cannot be cashed directly at a bank counter.
Example: A cheque with two parallel lines, like this: ||. It can only be deposited into a bank account.
(ii) Special Crossing: In special crossing, the cheque is crossed with two parallel lines along with the name of a specific bank written between the lines.
Example: A cheque crossed with “Pay to the account of [Bank Name] ||”. It can only be deposited into the account of the specified bank.
(iii) Restrictive Crossing: Restrictive Crossing is a type of cheque crossing where the words “A/c Payee Only” or “Payee’s Account Only” are written between the two parallel lines on the cheque. Non-Negotiable Crossing – It is when the words ‘Not Negotiable’ are written between the two parallel transverse lines.
Examples: “A/c Payee Only” written between the two parallel lines on a cheque ensures it can only be deposited into the payee’s account.
For Old Course
Questions in Lieu of Project work
Answer any four from the following:
19. What are the objectives of World Bank? Discuss.
Ans: Following are the objectives of World Bank:
(i) Alleviating poverty and improving living conditions in developing countries. Promoting sustainable development practices.
(ii) Reducing income inequality and promoting shared prosperity and Fostering inclusive and sustainable economic growth.
(iii) It provides help in economic development programmes and provides finance on easy terms.
(iv) Building resilience to shocks and challenges.
(v) Enhancing access to education, healthcare, and social services. Supporting infrastructure development.
20. Write five essential elements of valid endorsement.
Ans: Following are the essential elements of valid endorsement:
(i) It must be on the instrument. The endorsement may be on the back or the face of the instrument and if no space is left on the instrument, it may be made on a separate paper attached to it called along.
(ii) The endorser must have firsthand experience with or knowledge of the product, service, or idea being endorsed. Endorsing something without using or understanding it is misleading.
(iii) IIt must be made by the maker or holder of the instrument. A stranger cannot endorse it.
(iv) It may be made either by the endorser merely signing his name on the instrument or by any words showing an intention to endorse or transfer the instrument to a specified person.
(v) It must be signed by the endorser. Full name is not essential. Initials may suffice. Thumb-impression should be attested. Signature may be made on any part of the instrument.
21. Write the functions of IMF.
Ans: Following are the functions of IMF:
(i) The first important function of IMF is to maintain exchange stability and thereby to discourage any fluctuations in the rate of exchange.
(ii) MF helps to achieve stability in foreign exchange rates. The rates of exchange under the IMF had not fluctuated as much as they used to before the establishment of the IMF.
(iii) It provides regular assessments of global, regional, and individual country economic developments and risks through reports like the World Economic Outlook and Global Financial Stability Report.
(iv) The IMF aims to reduce global poverty, encourage international trade, and promote financial stability and economic growth.
(v) MF provided help to its low-income members with policy advice, technical assistance and loans for poverty reduction and reducing the debt burden. Loan instruments include programs like the Stand-By Arrangements (SBA), Extended Fund Facility (EFF), and concessional financing for low-income countries through the Poverty Reduction and Growth Trust (PRGT).
22. Explain the duties of collecting banker.
Ans: The duties of collecting banker:
(i) Scrutinizing instruments: A collecting banker examines the instruments they are collecting.
(ii) Checking endorsements: A collecting banker verifies the endorsements on the instruments.
(iii) Presenting instruments on time: A collecting banker presents the instruments for collection within the required time frame.
(iv) Collecting proceeds: A collecting banker collects the proceeds from the instruments and deposits them into the payee’s account.
(v) Notifying dishonour: A collecting banker notifies the customer if the instrument is dishonored.
23. Write the functions of stock exchange.
Ans: The functions of stock exchange are:
(i) One of the main functions of stock exchanges is determining the prices of securities. Since the stock exchange operates on the demand and supply of securities, this concept is leveraged for determining the prices on a continuous basis. Speculation accelerates this demand and supply in the market.
(ii) A stock exchange offers a marketplace for the buying and selling of securities, ensuring that investors can easily convert their investments into cash.
(iii) For companies, an important function of stock exchange is raising capital. With an increase in the security prices, companies can raise capital to fund their business operations and projects. This helps in the growth of industries within the country. Many companies can even come back from losses by raising capital from traders in the stock exchange.
(iv) A stock exchange helps in the price discovery of shares, bonds, and any other listed security. As people buy and sell shares through a stock exchange, it helps in finding the price of securities based on their demand and supply
(v) A stock exchange helps companies raise capital through shares and bonds. The companies can use the capital thus raised for expansion and growth
24. What are the objectives of LIC?
Ans: Following are the objectives of LIC:
(i) Maximize mobilization of people’s savings by making insurance-linked savings adequately attractive.
(ii) To provide efficient, transparent, and prompt services to policyholders, ensuring customer satisfaction and trust.
(iii) LIC aims to provide its customers with a higher return on economic security through its various products and services compared to other investment companies.
(iv) Conduct business with utmost economy and with the full realization that the moneys belong to the policyholders.
(v) life insurance protects your spouse and children from the potentially devastating financial losses that could result if something happened to you.
