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 are indeed significant participants in the money market, where short-term borrowing and lending of funds take place. They engage in various money market instruments like Treasury bills, certificates of deposit, commercial paper, etc.
Statement 2 is false. Commercial banks are involved in both the primary market and the secondary market. 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.
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