Question : Statement 1: Commercial banks are major participants in the money market.
Statement 2: Commercial banks are exclusively involved in the primary market.
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. Commercial banks play a significant role in the money market by participating in various money market instruments such as Treasury bills, certificates of deposit, commercial paper, and short-term loans to other financial institutions.
Statement 2 is false. Commercial banks are involved in both the primary and secondary markets. In the primary market, they can be involved in activities like underwriting of new securities or acting as intermediaries between issuers and investors. In the secondary market, they trade existing securities among investors.
