Consider the following statements regarding the financial market 1 Money market and capital market a...........

Finance (Phase -I & II) Valuation of Securities

Consider the following statements regarding the financial market:

1. Money market and capital market are the two segments of the financial market of an economy.

2. The long-term financial market is called money market while the short time financial market is called capital market.

Which of the above statement is true?

Only 1

Only 2

Both 1 and 2

Neither 1 nor 2

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Explanation:

In a financial market of an economy, funds are transacted between the fund-surplus and fund-scarce individuals and groups on the basis of either interest or dividend. Financial might be an institutionalised or a non-institutionalised will serve the motive of supply of funds for the desired time period. The time period can be a long-term and a short-term.

Financial markets in every economy are having two separate segments today, one catering to the requirements of the short-term funds and the other to the requirements of the long-term funds. The short-term financial market is known as the money market while the long-term financial market is known as the capital market. The money market fulfils the requirements of funds for the period up to 364 days (i.e. short-term) while the capital market does the same for the period above 364 days (i.e., long-term).