Given below are two statements:
Statement I: A financial market exists wherever a financial transaction occurs.
Statement II: The purchase and sale of equity shares on a stock exchange is a form of creation of financial assets.
In the light of the above statements, choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Statement I is correct but Statement II is incorrect.
Statement I: A financial market exists wherever a financial transaction occurs. — Correct. A financial market is a market for the creation and exchange of financial assets. Any such creation or exchange is a financial transaction, so a financial market exists wherever one occurs.
Statement II: The purchase and sale of equity shares on a stock exchange is a form of creation of financial assets. — Incorrect. Shares traded on a stock exchange are existing financial assets, so buying and selling them is an exchange of assets. Creation means the initial issue of shares and debentures by a firm.
NCERT (Pre-rationalised Edition): “CONCEPT OF FINANCIAL MARKET … A financial market is a market for the creation and exchange of financial assets. Financial markets exist wherever a financial transaction occurs. Financial transactions could be in the form of creation of financial assets such as the initial issue of shares and debentures by a firm or the purchase and sale of existing financial assets like equity shares, debentures and bonds.” |