Match the following :

Group A	Group B
(a) Money market	(1) Newly issued securities
(b) Capital market	(2) Long term financial instruments
(c) Primary market	(3) Short term financial instruments
(d) Secondary market	(4) Stock Exchange

 

The correct answer is - (a) - (iii), (b) - (ii), (c) - (i), (d) - (iv)

Key Points

• Money Market (a) - Short-term financial instruments (iii)
  • The Money Market deals with short-term financial instruments and is used for funding short-term liquidity needs.
  • Examples include Treasury Bills, Commercial Papers, and Certificates of Deposit.
• Capital Market (b) - Long-term financial instruments (ii)
  • The Capital Market is for long-term financial instruments, providing funding for businesses and governments over an extended period.
  • Examples include shares, bonds, and debentures.
• Primary Market (c) - Newly issued securities (i)
  • The Primary Market is where new securities are issued for the first time (e.g., Initial Public Offerings - IPOs).
  • This market enables companies to raise capital directly from investors.
• Secondary Market (d) - Stock Exchange (iv)
  • The Secondary Market facilitates the trading of existing securities between investors, typically on platforms like the Stock Exchange.
  • Examples of stock exchanges include the New York Stock Exchange (NYSE) and the National Stock Exchange (NSE).

Additional Information

• Money Market
  • It is crucial for maintaining liquidity in the financial system.
  • Instruments in the money market are typically low-risk and mature within a year.
• Capital Market
  • It can be divided into two segments: the Equity Market (for shares) and the Debt Market (for bonds).
  • It is essential for long-term economic growth and infrastructure development.
• Primary Market
  • Investors directly buy securities from issuing companies.
  • Funds raised are used for business expansion, debt repayment, or other organizational needs.
• Secondary Market
  • Provides liquidity to investors by enabling them to buy and sell securities after the initial issuance.
  • Helps determine the market value of securities based on demand and supply.