Question
Which of the below mentioned statements are correct?
i. Bond price and interest rate are negatively related ii. In secondary market prices of government securities are decided by RBI iii. Credit creation varies directly with Cash Reserve Ratio (CRR)Solution
When interest rate increases in the market, prices of the bonds decline. In secondary market the price of any security is determined by the market (demand and supply). RBI has no control on it. When CRR increases credit creation declines.
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