Question : Assertion: Stock exchanges perform the function of providing liquidity to securities.
Reason: Investors can easily buy and sell securities on stock exchanges.
Option 1: Both assertion and reason are true, and the reason is the correct explanation of the assertion.
Option 2: Both assertion and reason are true, but the reason is not the correct explanation of the assertion.
Option 3: Assertion is true, but the reason is false.
Option 4: Assertion is false, but the reason is true.
Correct Answer: Both assertion and reason are true, and the reason is the correct explanation of the assertion.
Solution : The correct answer is (a) Both assertion and reason are true, and the reason is the correct explanation of the assertion.
The assertion is true. Stock exchanges do indeed perform the function of providing liquidity to securities. Liquidity refers to the ability to quickly buy or sell an asset in the market without significantly affecting its price. Stock exchanges, by acting as a marketplace where investors can readily buy or sell securities, contribute to liquidity in the market.
The reason is true and provides the correct explanation. Investors can easily buy and sell securities on stock exchanges due to the structure and functioning of these markets, which fosters liquidity. The ease and efficiency of transactions on stock exchanges enhance liquidity by ensuring that there are buyers and sellers available for a wide range of securities, promoting active trading and price efficiency.
Question : Assertion: Stock exchanges provide a platform for buyers and sellers to trade securities.
Reason: Stock exchanges facilitate the issuance of new securities to the public.
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