Question : Assertion: Dematerialization refers to the conversion of physical securities into electronic form.
Reason: Dematerialization helps in reducing the risk of theft and forgery of securities.
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. Dematerialization indeed refers to the process of converting physical securities, such as share certificates and bonds, into an electronic or digital form, which is held in a demat account.
The reason is true and provides the correct explanation of the assertion. Dematerialization helps in reducing the risk of theft and forgery of securities because electronic or digital securities are held in a demat account and do not involve the physical handling and transfer of paper certificates, thereby reducing the risk of theft or forgery associated with physical certificates.
Question : Assertion: Depository Participants (DPs) play a key role in the dematerialization process.
Reason: DPs facilitate the conversion of electronic securities into physical certificates.
Question : Assertion: Primary market transactions involve the issuance of new securities to the public.
Reason: Primary market transactions facilitate the trading of existing securities.
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