Read the case study and answer question:
Radiant limited is a well known Pharmaceutical company. The company is planning to expand and modernize its business operations for which it requires 500 crores. Akshat, the finance manager of the company, advised to issue Equity Shares in the Capital market.
The Board finally decided to issue 300 crores through issue of Shares to general public electronically in the primary market. For the remaining 200 crores, the company will give a privilege to existing shareholders to subscribe to new shares as per the conditions of Radiant limited.
In order to meet floatation cost, for raising funds in the capital market the company decided to issue a money market instrument. Further the company will get the shares listed in the secondary market. Listing with stock exchange will facilitate buying and selling of securities and provide safety of investment to the investors.
What is the duration of maturity of money market instruments?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Upto 1 year
The money market deals in short-term funds. Its instruments mature in up to one year. Anything with a longer maturity belongs to the capital market. So the other three options, all longer than one year, describe 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): “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. …” “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.” |