Match List-I with List-II.

Choose the correct answer from the options given below :

(A)-(III), (B)-(IV), (C)-(I), (D)-(II)

The correct answer is option (3)- (A)-(III), (B)-(IV), (C)-(I), (D)-(II)

(A) Function of Financial Market- (III) Providing liquidity to financial Assets.
Financial markets play an important role in the allocation of scarce resources in an economy by performing the following four important functions- Providing Liquidity to Financial Assets, Mobilisation of Savings and Channeling them into the most Productive Uses, Facilitating Price Discovery, Reducing the Cost of Transactions.

Providing Liquidity to Financial Assets: Financial markets facilitate easy purchase and sale of financial assets. In doing so they provide liquidity to financial assets, so that they can be easily converted into cash whenever required. Holders of assets can readily sell their financial assets through the mechanism of the financial market.

(B) Instrument of Money- (IV) Call Money, Commercial Bills.
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. Some instruments of money market are Treasury Bill, Commercial Paper, Call Money, Certificate of Deposit, Commercial Bill.

Call money- Call money is short term finance repayable on demand, with a maturity period of one day to fifteen days, used for inter-bank transactions. Commercial banks have to maintain a minimum cash balance known as cash reserve ratio. The Reserve Bank of India changes the cash reserve ratio from time to time which in turn affects the amount of funds available to be given as loans by commercial banks.

Commercial Bill: A commercial bill is a bill of exchange used to finance the working capital requirements of business firms. It is a short-term, negotiable, self-liquidating instrument which is used to finance the credit sales of firms.

(C) Primary Market- (I) E-IPO, Rights issue.
The primary market is also known as the new issues market. It deals with new securities being issued for the first time.  There are various methods of floating new issues in the primary market- Offer through Prospectus, Right issue, Offer for Sale, Private Placement, E-IPOs.

E-IPOs: A company proposing to issue capital to the public through the on-line system of the stock exchange has to enter into an agreement with the stock exchange. This is called an Initial Public Offer (IPO). SEBI registered brokers have to be appointed for the purpose of accepting applications and placing orders with the company. The issuer company should also appoint a registrar to the issue having electronic connectivity with the exchange.

Right issue- This is a privilege given to existing shareholders to subscribe to a new issue of shares according to the terms and conditions of the company. The shareholders are offered the ‘right’ to buy new shares in proportion to the number of shares they already possess.

(D) Methods of floatation- (II) Offer for sale.
There are various methods of floating new issues in the primary market- Offer through Prospectus, Right issue, Offer for Sale, Private Placement, E-IPOs.
Offer for Sale: Under this method securities are not issued directly to the public but are offered for sale through intermediaries like issuing houses or stock brokers. In this case, a company sells securities enbloc at an agreed price to brokers who, in turn, resell them to the investing public.