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Interview Question: Share Market

 

Interview Questions (Continued...)

Share Market

What is ADR?
  • An American depository receipt is a certificate issued by a U.S. bank that represents shares in foreign stock.
  • These certificates trade on American stock exchanges.
  • ADRs and their dividends are priced in U.S. dollars.
  • ADRs represent an easy, liquid way for U.S. investors to own foreign stocks.
  • These investments may open investors up to double taxation and there are a limited number of options available.
What is GDR?
  • A global depositary receipt (GDR) is a certificate issued by a bank that represents shares in a foreign stock on two or more global markets.
  • GDRs typically trade on American stock exchanges as well as Eurozone or Asian exchanges.
  • GDRs and their dividends are priced in the local currency of the exchanges where the shares are traded.
  • GDRs represent an easy, liquid way for U.S. and international investors to own foreign stocks.

What is the difference between capital market and money market?

  • he money market is a short-term lending system. Borrowers tap it for the cash they need to operate from day to day. Lenders use it to put spare cash to work.
  • The capital market is geared toward long-term investing. Companies issue stocks and bonds to raise money to grow their businesses. Investors buy them to share in that growth.
  • The money market is less risky than the capital market while the capital market is potentially more rewarding. 

What is intraday trading?

    Intraday trading refers to buying and selling of stocks on the same day. It is also referred to as Day Trading by many.

What is bull, bear and lame duck in stock market?

    "Bull", "bear" and "stag" are stock market terms describe a particular type of investor, or a perspective on market conditions. Bull and bear reflect contrasting views on a stock's direction, while a stag is someone who gets in and out of stocks quickly for profit.

Lame Duck:

    This refers to the condition of a bear who is not able to meet his commitments. A bear sell securities which he does not hold, with the expectation that prices are going to fall. His intention is to buy them at a lower price later and profit from the difference. On the fixed date he may not be able to deliver the security as it may not be available in the market. The buyer may not be inclined to carry forward the transaction. In such a case, the bear is said to be struggling like a lame duck.

 

What is free float market capitalization?

Free-float methodology is a method of calculating the market capitalization of a stock market index's underlying companies. Using this methodology, the market capitalization of a company is calculated by taking the equity's price and multiplying it by the number of shares readily available in the market.

What is bonus issue?

  • A bonus issue of shares is stock issued by a company in lieu of cash dividends. Shareholders can sell the shares to meet their liquidity needs.
  • Bonus shares increase a company's share capital but not its net assets.

 For example, a three-for-two bonus issue entitles each shareholder three shares for every two they hold before the issue. A shareholder with 1,000 shares receives 1,500 bonus shares (1000 x 3 / 2 = 1500).

What is right issue?

The Rights issue is an invitation to the existing shareholders to buy new shares in proportion to their existing shareholding. The issue is called so as it gives the existing shareholders a pre-emptive right to buy new shares at a price that is lesser than market price.

What is ASBA in primary market?

ASBA abbreviated as Application Supported by Blocked Amount is an IPO application process developed by SEBI. It is an application containing an authorization to block the application money in the bank account, for subscribing to an IPO issue.

What is Beta in finance?

Definition: Beta is a numeric value that measures the fluctuations of a stock to changes in the overall stock market.

Description: Beta measures the responsiveness of a stock's price to changes in the overall stock market. On comparison of the benchmark index for e.g. NSE Nifty to a particular stock returns, a pattern develops that shows the stock's openness to the market risk. This helps the investor to decide whether he wants to go for the riskier stock that is highly correlated with the market (beta above 1), or with a less volatile one (beta below 1).

For example, if a stock's beta value is 1.3, it means, theoretically this stock is 30% more volatile than the market. Beta calculation is done by regression analysis which shows security's response with that of the market.

By multiplying the beta value of a stock with the expected movement of an index, the expected change in the value of the stock can be determined. For example, if beta is 1.3 and the market is expected to move up by 10%, then the stock should move up by 13% (1.3 x 10).

What is cloud storage and how does it work?

Cloud storage uses data centers with massive computer servers that physically store the data and make it available online to users via web. Users can remotely upload their content, store them and retrieve the data as and when required.

 

What is SEZ zone in India?

Special economic zones (SEZs) in India are areas that offer incentives to resident businesses. SEZs typically offer competitive infrastructure, duty free exports, tax incentives, and other measures designed to make it easier to conduct business. Each SEZ is unique.

 

What is greenfield and brownfield investment?

Greenfield and brownfield investments are two types of foreign direct investment. With greenfield investing, a company will build its own, brand new facilities from the ground up. Brownfield investment happens when a company purchases or leases an existing facility.

Ratio:

    The quantitative relation between two amounts showing the number of times one value contains or is contained within the other.

What is monopoly, explain?

Definition: A market structure characterized by a single seller, selling a unique product in the market. In a monopoly market, the seller faces no competition, as he is the sole seller of goods with no close substitute. He enjoys the power of setting the price for his goods.

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