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    Question

    Which of the following statements regarding the

    classification of financial markets is/are correct?    1. Debt markets are primarily concerned with long-term investment instruments like bonds.    2. Equity markets facilitate the buying and selling of company shares.    3. Derivative markets involve trading securities based on the value of underlying assets like commodities, currencies, or stocks.    4. Money markets deal with instruments with more than one year of maturity.
    A 1 and 2 only Correct Answer Incorrect Answer
    B 2 and 3 only Correct Answer Incorrect Answer
    C 1, 2, and 3 only Correct Answer Incorrect Answer
    D 1, 2, and 4 only Correct Answer Incorrect Answer
    E All of the above Correct Answer Incorrect Answer

    Solution

    Money markets deal with instruments that have maturities of less than one year, not more than one year. The markets that deal with instruments of more than 1 year are referred to as the capital markets. Equity market is part of capital markets and deals with raising and trading of share capital of corporates. Debt markets involving long term bonds is also a part of capital markets. Derivatives are instruments that derive value from an underlying asset. Derivative markets deal in derivative instruments like forwards, futures, options and swaps.

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