[Solved] Which of the following is NOT an instrument of capital marke (2024)

FAQs

[Solved] Which of the following is NOT an instrument of capital marke? ›

Expert-Verified Answer

The correct answer is Commercial paper. Key Points Capital market: A capital market is a financial market in which investors buy and sell financial securities, such as bonds and shares.

Capital market instruments are various financial tools available in the capital markets for investment and fundraising. They include equities like stocks, debt securities like bonds and debentures, derivatives such as options and futures, Exchange-Traded Funds (ETFs), and foreign exchange instruments.

Expert-Verified Answer

U.S. Treasury bills is NOT a capital market instrument.

Capital market instruments are financial securities used by entities to raise long-term funds. They include stocks, bonds, and derivatives.

Treasury bills, or T-bills, are short-term debt instruments issued by a government. These are generally issued with a maturity of less than one year. Thus, they fall into the category of the money market, not the capital market.

Corporate bonds

Bonds are long-term debt instruments. They are not money market instruments. Thus, the answer is corporate bonds.

a security in the form of shares, bonds, etc. that a company sells to raise the money it needs to operate: Legally, capital instruments are debt and should therefore be disclosed within liabilities.

Primary instruments include cash-traded products like stocks, bonds, currencies, and spot commodities. Understanding primary instruments provides the base knowledge for derivatives, whose prices are derived from the primary (underlying) asset.

Money market instruments like certificates of deposit, treasury bills, etc., are highly liquid short-term assets. Such financial instruments are traded for less than a year. On the other hand, capital market instruments like bonds and shares are traded for the long term (1 year or more).

Which is not a component of the capital market? ›

RBI is not a part of capital market.

Hence, providing better returns to direct investors is NOT the function of a capital market.

Treasury bills, repurchase agreement and commercial paper all are short term investments and have a maturity level of less than one year. Hence, shares and bonds having maturity of more than one year are not considered as money market instrument.

Various instruments used in the capital market for making and raising investments can be, broadly, classified into the following types: Share or Stock. Debt Instruments. Derivatives.

Based on this definition, we can see that only two of the above markets are included in the capital market, that is Government Bond Market and the stock market. The other two, Call Money Market and Treasury Bill Market are part of the money market, as they deal with short-term financial instruments.

Some examples of capital markets are NASDAQ, BSE, New York Stock Exchange, London Stock Exchange.

Equity shares are long-term instruments and hence, cannot be a money market instrument. Q.

Hence, providing better returns to direct investors is NOT the function of a capital market.