Question : Statement 1: Capital market instruments have maturities ranging from a few days to one year.
Statement 2: Capital market instruments are used for long-term financing.
Option 1: Statement 1 is true, and statement 2 is true.
Option 2: Statement 1 is true, but statement 2 is false.
Option 3: Statement 1 is false, and statement 2 is true.
Option 4: Statement 1 is false, and statement 2 is false.
Correct Answer:
Statement 1 is true, but statement 2 is false.
Solution : The correct answer is (b) Statement 1 is true, but statement 2 is false.
Statement 1 is true. Capital market instruments can indeed have a range of maturities, including short-term maturities (a few days) up to longer-term maturities (up to one year). Examples of short-term capital market instruments include Treasury bills and commercial paper.
Statement 2 is false. Capital market instruments are typically used for medium to long-term financing rather than exclusively long-term. Long-term financing typically involves maturities exceeding one year, and while capital market instruments can certainly have maturities beyond one year, they can also have shorter maturities.
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