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CS Executive · Capital Market and Securities Laws · Basics of Capital Market

Rohan holds government securities and shares of listed companies. Which of the following correctly classifies these within the Indian capital market structure?

Both are capital market securities. Government securities are gilt-edged debt instruments issued by the government, while shares are equity instruments representing ownership in a company. Tradability does not make them money market instruments, which are short-term.

  1. ABoth are capital market securities, with government securities being gilt-edged debt instruments and shares being equity instrumentsCorrect
  2. BBoth are money market instruments because they are tradable
  3. CGovernment securities are equity instruments and shares are debt instruments
  4. DGovernment securities belong to the foreign exchange market and shares to the money market

Explanation

Government securities are long-term debt instruments, often called gilt-edged securities, while shares represent ownership or equity. Both are traded in the capital market. Option B wrongly treats tradability as the test for money market instruments, which are short-term.

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