Consider the following markets:
- Government Bond Market
- Call Money Market
- Treasury Bill Market
- Stock Market
How many of the above are included in capital markets?
- Only one
- Only two
- Only three
- All four
Explanation
The Government Bond Market and the Stock Market are included in the capital markets
- The term capital market refers to facilities and institutional arrangements through which long-term funds, both debt and equity, are raised and invested. It consists of a series of channels through which the community’s savings are made available to industrial and commercial enterprises and the public in general. It directs these savings toward their most productive use, leading to economic growth and development. The capital market consists of development banks, commercial banks and stock exchanges.
- The main instruments traded in the capital market are equity shares, debentures, bonds, preference shares, etc. The government bond market is a segment of the capital market that focuses on the trading of long-term debt securities. Similarly, the stock market is part of the capital market, trading equity securities that represent ownership interests in companies.
- The Capital Market can be divided into two parts: Primary Market and Secondary Market.
The Call Money Market and Treasury Bill Market are not included in the capital markets
- The main instruments traded in the money market are short-term debt instruments such as T-bills, trade bills reports, commercial paper and certificates of deposit. The call money market handles very short-term borrowing and lending, typically overnight, and is not part of the capital market. Similarly, the treasury bill market deals with short-term government debt instruments and is also excluded from the capital market.
