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IPO Knowledge Test 2: Understanding Grey Market Premium (GMP)

Leave a Comment / By StockHoney / February 6, 2025

Welcome to your IPO Knowledge Test 2: Understanding Grey Market Premium (GMP)
Grey Market Premium (GMP) indicates IPO demand before listing. This test will assess your knowledge of its role and impact.

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What does Grey Market Premium (GMP) represent?

The official price set by stock exchanges for IPO shares

The brokerage commission charged on IPO trades

The interest rate applied to IPO loans

The premium at which IPO shares are traded in the unofficial market before listing

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Where does grey market trading take place?

On NSE and BSE

Through SEBI-registered brokers

In an informal, unregulated network

On international stock exchanges

None

What is the primary reason for the existence of the grey market?

To help retail investors bypass brokerage fees

To allow investors to trade IPO shares before official listing

To provide SEBI with early pricing indicators

To facilitate long-term investment strategies

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Which of the following factors influence GMP?

Company fundamentals, market sentiment, and peer company performance

SEBI regulations and brokerage fees

Government policies on taxation

Fixed interest rates set by RBI

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How is GMP calculated?

Using a fixed mathematical formula

By analyzing company financials and balance sheets

Based on demand and supply in the unofficial market

Through SEBI’s regulatory framework

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Which of the following is a disadvantage of relying on GMP for investment decisions?

It is an officially regulated metric

It guarantees high listing gains

It is speculative and unregulated

It always accurately predicts stock performance

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What is the difference between GMP and Kostak rate?

GMP is regulated by SEBI, while Kostak is an unregulated concept

GMP applies to equity shares, while Kostak applies only to debt instruments

GMP is applicable post-listing, while Kostak is determined after allotment

GMP is an unofficial IPO premium, while Kostak is the price for selling an IPO application

None

Which of the following is NOT a risk associated with GMP?

High volatility

Market manipulation

Regulatory intervention by SEBI

Unreliable prediction of listing gains

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Why might a high GMP not always be a good indicator for investing in an IPO?

It does not account for company fundamentals

It guarantees long-term success

It is an official metric provided by stock exchanges

It ensures high brokerage fees

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What should retail investors consider while using GMP as an investment tool?

Treat GMP as a sole deciding factor for investment

Combine GMP with research on company fundamentals

Invest only in IPOs with high GMP values

Avoid IPO investments altogether

None

Congratulations! You've completed the GMP MCQ Test!

Thank you for participating! Understanding Grey Market Premium (GMP)helps in making informed IPO investment decisions. Keep learning and refining your strategies!

Share this quiz with friends and colleagues to help them deepen their IPO knowledge. Try again for a better score or explore more financial market tests!

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