Question

Which of the following are instruments under money market?
1) Treasury bills 2) Commercial papers
3) Debentures 4) Certificates of deposits
5) G-sec
Which of the following statement(s) is/are correct?

• A. Only 1, 2 and 4
• B. Only 2, 3, 4 and 5
• C. Only 1, 4 and 5
• D. All of the above

Answer 1

The correct option is A Only 1, 2 and 4

The financial markets can broadly be divided into money and capital market.

Money Market: Money market is a market for debt securities that pay off in the short term usually less than one year, for example the market for 90-days treasury bills. This market encompasses the trading and issuance of short term non equity debt instruments including treasury bills, commercial papers, bankers acceptance, certificates of deposits, etc.

Capital Market: Capital market is a market for long-term debt and equity shares. In this market, the capital funds comprising of both equity and debt are issued and traded. This also includes private placement sources of debt and equity as well as organized markets like stock exchanges. Capital market can be further divided into primary and secondary markets.