Question

Which of the following would not be considered as capital market security?

A. a corporate bond B. a common stock

C. a 6-month treasury bill

D. a mutual fund share



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Answer 1

C. Is the correct answer

Answer 2

Answer:

A 6-month treasury bill (option C) would not be considered capital market security.

Explanation:

• A money market is a market for short-term securities or short-term funds for a period of up to one year.
• The money market is the source of finance for working capital.
• It does not have a fixed geographical location but it includes all institutions and organisation for short-term debts such as RBI, LIC, GIC, UTI, etc.
• Instruments of the money market are as follows:

1. Treasury bills
2. call money
3. bills of exchange
4. commercial paper
5. certificate of deposit
6. repurchase agreement option( REPO)

On the other hand,

• The capital market is a market for medium & long-term funds.
• It refers to lending and borrowing of funds for a period of medium and long term.
• The capital markets have a fixed geographical location known as a Stock exchange where trading happens.
• Instruments of the capital market are as follows:

1. corporate bonds
2. stock
3. shares
4. mutual funds
5. debentures

Thus, a 6-month treasury bill will not be considered as an instrument of the capital market because its maturity period is up to 1 year only and it is an instrument of the short-term market.

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