Which of the following statement is/are false about Financial market?
A. Investment in capital market requires huge financial outlay.
B. Money market has no physical location.
C. The primary market is known as new issue market.
D. Money market instruments are riskier both with respect to returns and principal repayments.
E. Financial market consists of capital market and secondary market only.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → A, D, E only
A. Investment in capital market requires huge financial outlay. — A false statement about the financial market (Correct). Securities have a low value, such as Rs. 10 or Rs. 100, and shares are traded in small lots. Small savers can invest. It is the money market where the transactions involve huge sums.
B. Money market has no physical location. — A true statement about the financial market (Incorrect). The money market has no physical location. Its work is done over the telephone and through the internet.
C. The primary market is known as new issue market. — A true statement about the financial market (Incorrect). The primary market deals with new securities issued for the first time, so it is also called the new issues market.
D. Money market instruments are riskier both with respect to returns and principal repayments. — A false statement about the financial market (Correct). Money market instruments are low-risk, unsecured, short-term debt instruments that are highly liquid. They are not riskier.
E. Financial market consists of capital market and secondary market only. — A false statement about the financial market (Correct). The financial market is divided into the money market and the capital market. The secondary market is only a part of the capital market.
Note: Although the chapter ‘Financial Markets’ was dropped from the NCERT textbooks during rationalisation, it has stayed in the NTA syllabus every year since 2022, except for 2025, and it is part of the syllabus again from 2026. This question is therefore based on the pre-rationalised NCERT, an extract from which is given below. NCERT (Pre-rationalised Edition): “(iii) Investment Outlay: Investment in the capital market i.e. securities does not necessarily require a huge financial outlay. The value of units of securities is generally low i.e. Rs 10, Rs 100 and so is the case with minimum trading lot of shares which is kept small i.e. 5, 50, 100 or so. This helps individuals with small savings to subscribe to these securities. In the money market, transactions entail huge sums of money as the instruments are quite expensive.” “MONEY MARKET The money market is a market for short term funds which deals in monetary assets whose period of maturity is upto one year. These assets are close substitutes for money. It is a market where low risk, unsecured and short term debt instruments that are highly liquid are issued and actively traded everyday. It has no physical location, but is an activity conducted over the telephone and through the internet. …” “PRIMARY MARKET The primary market is also known as the new issues market. It deals with new securities being issued for the first time. …” “Financial markets are classified on the basis of the maturity of financial instruments traded in them. Instruments with a maturity of less than one year are traded in the money market. Instruments with longer maturity are traded in the capital market.” |