FINANCIAL SERVICES - CPC6A 2 Mark Questions from Unit - I

1. What are the financial instruments?

 Financial instruments are monetary contracts between parties
 Financial instruments are assets that can be traded
 They can be created, traded, modified and settled.
 They can be cash, evidence of an ownership interest in an entity

2. How interest rate is to be determined?

 Interest rates are the cost of borrowing money 
 In India, short-term interest rates are determined by central banks
 Fiscal and Monetary policy also influences the determination of interest rates

3. State the meaning of financial system

 Financial system is a system that allows the exchange of funds between
lenders, investors, and borrowers
 It is a network of financial institutions, financial markets, financial
instruments, and financial services that helps money transfer
 According to Dhanilal, “Financial system is the integrated form of financial
institutions, financial markets, financial securities, and financial services which
aim is to circulate the funds in an economy for economic growth.”

4. Who are the players of financial markets?

1. Banks
2. Primary Dealers (PDs)
3. Financial Institutions (FIs)
4. Stock Exchanges - BSE & NSE
5. Brokers - intermediating between buyers and seller of securities
6. Investment Bankers (Merchant Bankers)
7. Foreign Institutional Investors (FIIs)
8. Custodians - They are allowed to hold securities on behalf of customers
9. Depositories - hold securities in DEMAT (electronic) form

5. Name any two components of financial services

1. Banking
2. Wealth management
3. Mutual funds
4. Insurance
5. Stock Market
6. Tax / Audit Consulting
7. Capital Restructuring
8. Portfolio Management
6. Mention any two players in financial service sector
 FINANCIAL SERVICES - CPC6A 2 Mark Questions from Unit - I

1. Financial Institutions
2. Financial Markets
3. Financial Instruments (Assets or Securities)
4. Financial Services

7. What is meant by Financial Services?

 The services provided by the finance market
 Financial service is part of financial system
 The products and services offered by institutions

8. What are asset management companies?

 An asset management company (AMC) is an investment
management company/firm that invests the mutual funds of retail investors
in securities with the fixed investment objectives

9. What is a financial services market?

 A market that comprises participants such as commercial banks that provide
various financial services like ATM
 A financial market is a market in which people trade financial securities and
derivatives at low transaction costs.