The term capital market refers to facilities and institutional arrangements through which ________ are raised and invested.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → long-term funds, both debt and equity
Option (1) long-term funds, both debt and equity — Correct. The capital market deals in long-term funds. These funds are raised both as debt, such as debentures and bonds, and as equity, that is, shares.
Option (2) short-term funds, both debt and equity — Incorrect. Short-term funds are dealt in the money market. The capital market deals in long-term funds.
Option (3) long-term funds in the form of debt — Incorrect. The capital market raises funds as equity too. Equity shares are its main instrument, along with debentures and bonds.
Option (4) short-term funds in the form of debt — Incorrect. Short-term debt instruments, such as treasury bills and commercial paper, are traded in the money market.
NCERT (Pre-rationalised Edition): “Capital Market The term capital market refers to facilities and institutional arrangements through which long-term funds, both debt and equity are raised and invested. It consists of a series of channels through which savings of the community are made available for industrial and commercial enterprises and for the public in general. It directs these savings into their most productive use leading to growth and development of the economy. The capital market consists of development banks, commercial banks and stock exchanges.” |