Investment in the capital market does not necessarily require a huge financial outlay. Whom does this mainly help?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Individuals with small savings, who can subscribe to these securities
Option (1) Individuals with small savings, who can subscribe to these securities — Correct. Units of securities have a low value, such as Rs 10 or Rs 100, and the minimum trading lot is small. So individuals with small savings can subscribe to them.
Option (2) Business firms that need to finance the credit sales of their goods — Incorrect. Financing the credit sales of firms is the work of a commercial bill, a money market instrument.
Option (3) Individual investors who wish to trade in the secondary money market — Incorrect. This is about the money market, where transactions involve huge sums. Individual investors are permitted there but do not normally take part.
Option (4) Households that deposit their surplus funds with banks for interest — Incorrect. Depositing surplus funds with banks is the bank route for passing savings to firms.
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.” |