Q1. [1] § 4.1.1 Stock Exchange
Stock exchanges facilitate opportunities for investors to engage in the buying and selling of securities. Identify the pertinent function of a stock exchange.
- (A) Price Rigidity
- (B) Providing liquidity and marketability for existing securities
- (C) Determining the pricing of securities
- (D) Promoting the culture of equity investment
Previously asked in CBSE board exam
2026 92 Q2 (iv)
Generated by claude-sonnet-4-6 · 2026-06-15 07:06 · grounding rag
Model Answer
(B) Providing liquidity and marketability for existing securities
Stock exchanges provide a trading platform where buyers and sellers meet to transact in securities, ensuring existing securities can be easily bought and sold.
Source: Chapter 4, Section 4.1.1 Stock Exchange
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Explanation
- Option (B) is correct because the core function described — a platform for buying and selling already-issued securities — directly corresponds to providing liquidity and marketability.
- Option (C) (pricing/price discovery) is a separate function; the question specifically links to the buying and selling activity.
- Option (A) Price Rigidity is not a stock exchange function at all — exchanges actually enable flexible price discovery.
- Option (D) Promoting equity culture is a broader objective, not the specific function being described here.
- Remember: liquidity = ease of converting securities to cash; marketability = ease of buying/selling — both are enabled by the trading platform a stock exchange provides.
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