Q1:

Question Type: Concept

Question Variety: Text Based
Difficulty: Easy
Expected Time to Solve (in seconds):30
Topic: Business finance and marketing
Concept: Financial markets
Sub Concept: Capital market
Concept Field: Distinction between capital market and money market

Which of the following market are mainly deals in trading of shares and debentures?
A. Money market
B. Capital market
C. Both A and B
D. All of the above
Solution: B
Explanation- Capital market is the place where long-term funds can be procured from. In
other words, capital market is mainly facilitates the trade of equity shares and debentures
which are long-term securities.

Q2:

Question Type: Concept

Question Variety: Text Based
Difficulty: Easy
Expected Time to Solve (in seconds):30
Topic: Business finance and marketing
Concept: Financial markets
Sub Concept: Capital market
Concept Field: Distinction between capital market and money market

Capital market facilitates borrowing of ________ and money market facilitates _________.
A. Short-term funds, long-term funds
B. Long-term funds, short-term funds
C. Short-term funds, short-term funds
D. Long-term funds, long-term funds
Solution: B
Explanation- Financial market is classified into capital market and money market which is
distinguished based on the term of funds for which it is raised. Capital market facilitates
borrowing of long-term funds and money market facilitates borrowing of short-term funds.
Q3:

Question Type: Concept

Question Variety: Text Based
Difficulty: Medium
Expected Time to Solve (in seconds):60
Topic: Business finance and marketing
Concept: Financial markets
Sub Concept: Capital market
Concept Field: Distinction between capital market and money market

Which of the following instruments are NOT traded in the money market?
A. Equity shares
B. Call money
C. Commercial paper
D. T-bills
Solution: A
Explanation- Money market instruments may include treasury bills, call money, commercial
paper, commercial bills, cal money, etc. Capital market instruments may include equity
shares, preference shares and debentures.
.
Q4:

Question Type: Concept

Question Variety: Text Based
Difficulty: Medium
Expected Time to Solve (in seconds):60
Topic: Business finance and marketing
Concept: Financial markets
Sub Concept: Capital market
Concept Field: Distinction between capital market and money market

Duration of capital market instruments may be ______.

A. Short-term
B. Medium-term
C. Long-term
D. Both B and C
Solution: D
Explanation- Money market instruments are short-tem which is issued generally for one or
less than one year. Capital market instrument area issued for medium and long-term.

Q5:

Question Type: Conceptual

Question Variety: Text Based
Difficulty: Hard
Expected Time to Solve (in seconds):120
Topic: Business finance and marketing
Concept: Financial markets
Sub Concept: Capital market
Concept Field: Distinction between capital market and money market
Assertion (A): Investment outlay in capital market instruments is not necessarily large.
Reason (R): This is due to the value of units of securities may be low such as Rs.10 or
Rs.100.
Choose the correct answer from the following code:
A. Both (A) and (R) are true and (R) is the correct explanation of (A).
B. Both (A) and (R) are true, but (R) is not the correct explanation of (A).
C. (A) is true but (R) is false
D. (A) is false but (R) is true
Solution: A
Explanation- Money market instrument are more expensive than the capital market
investment as small lots of securities can be bought with less number of securities which
enables the investors to mobilize small savings.
Q6:

Question Type: Concept

Question Variety: Text Based
Difficulty: Medium
Expected Time to Solve (in seconds):60
Topic: Business finance and marketing
Concept: Financial markets
Sub Concept: Capital market
Concept Field: Distinction between capital market and money market

Identify the incorrect statement.

Codes:
I. Capital market facilitates trading of long-term securities whereas money market
facilitates trading of short-term securities.
II. Equity and debt are money market instruments
III. Investment in capital market is less risky than money market.
IV. Money market is more liquid than capital market.
Options:
A. Only statement II is incorrect
B. Statement II and III are incorrect
C. Statement I and IV are incorrect
D. None of the statements are incorrect
Solution: B
Explanation- Equity shares and debentures are long-term financial instruments which are
traded in capital market. Investment in capital market is more risky than investment in money
market.
Q7:

Question Type: Concept

Question Variety: Text Based
Difficulty: Easy
Expected Time to Solve (in seconds):30
Topic: Business finance and marketing
Concept: Financial markets
Sub Concept: Capital market
Concept Field: Distinction between capital market and money market

Investment in which of the following market yields more returns?

A. Capital market
B. Money market
C. Both A and B are equal
D. None of them
Solution: A
Explanation- Investment in capital market generates more yield as compared with the money
market as the capital market instruments are issued for longer term and are more risky. More
risky instruments provide more yield.

Q8:

Question Type: Concept

Question Variety: Text Based
Difficulty: Medium
Expected Time to Solve (in seconds):60
Topic: Business finance and marketing
Concept: Financial markets
Sub Concept: Capital market
Concept Field: Distinction between capital market and money market

Money market instruments are ____ risky as they are issued for short-term.

Options:
A. more
B. less
C. not
D. None of the above
Solution: B
Explanation- Money market instruments are less risky as compared to the capital market
instruments are money market instruments are issued for shorter duration tahn capital market
instruments.
Q9:
Question Type: Conceptual
Question Variety: Text Based
Difficulty: Medium
Expected Time to Solve (in seconds):60
Topic: Business finance and marketing
Concept: Financial markets
Sub Concept: Capital market
Concept Field: Distinction between capital market and money market

Which of the following institution was established for providing ready market for money
market instruments?
A. Central bank
B. Reserve bank of India
C. Discount finance house of India
D. None of the above
Solution: C
Explanation- Money market facilitates the trading of short-term debt instruments for which
an institution called Discount Finance house of India was established. In other words, this
institution was established to provide ready market for facilitating trade of money market
instruments.

Q10:

Question Type: Conceptual

Question Variety: Text Based
Difficulty: Hard
Expected Time to Solve (in seconds):120
Topic: Business finance and marketing
Concept: Financial markets
Sub Concept: Capital market
Concept Field: Distinction between capital market and money market

Assertion (A): There exists high possibility of earnings in equity investments.

Reason (R): Investment in equity is for longer term and profit is shared with shareholders.
Choose the correct answer from the following code:
A. Both (A) and (R) are true and (R) is the correct explanation of (A).
B. Both (A) and (R) are true, but (R) is not the correct explanation of (A).
C. (A) is true but (R) is false
D. (A) is false but (R) is true
Solution: A
Explanation- There is high probability of getting higher returns on the investment made in
long-term securities like equity and debt. In equity shares, the investment is made for longer
term and profit is shared with the shareholders which is expected to rise in long-ter.