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Business Studies · 2023 · 4 marks
CBSE 2023 · Region 1 · Set 1 · Q29
‘Stock Exchange not only provides liquidity and marketability to existing securities, but performs many other functions.’ Explain any two such…
‘Stock Exchange not only provides liquidity and
marketability to existing securities, but performs many
other functions.’
Explain any two such functions of Stock Exchange.
OR
(b)
Distinguish between primary market and secondary
market on any four bases.
Marking-scheme solution
Functions performed by Stock Exchange
(i)
Pricing of securities
(ii)
Safety of transactions
(iii)
Contributes to Economic Growth
(iv)
Spreading of Equity cult
(v)
Providing scope for speculation
Differences between primary market and secondary
market
| Primary market | Secondary market |
| There is sale of securities by new companies or further (new issues of securities by existing companies to investors). | There is trading of existing shares only. |
| Securities are sold by the company to the investor directly (or through an intermediary). | Ownership of existing securities is exchanged between investors. The company is not involved at all. |
| The flow of funds is from savers to investors, i.e. the primary market directly promotes | Enhances encashability (liquidity) of shares, i.e. the secondary market indirectly promotes |
| capital formation. | capital formation |
| Only buying of securities takes place in the primary market, securities cannot be sold there. | Both the buying and the selling of securities can take place on the stock exchange |
| Prices are determined and decided by the management of the company. | Prices are determined by demand and supply for the security. |
| There is no fixed geographical location. | Located at specified places |
(new issues of securities by existing companies to investors).
investor directly
(or between investors. The through an company is not involved intermediary). at all.
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CBSE Class 12 Business Studies past-paper question from the 2023 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.