Question

Choose the incorrect statement about 'Money Market':

• A. The main instruments traded in this market are Treasury bills, Trade bills, Commercial paper, and Certificates of deposit.
• B. In this market, transactions entail huge sums of money as the instruments are quite expensive.
• C. Participation in this market is by and large undertaken by institutional participants such as the Reserve Bank of India, banks, financial institutions, and finance companies.
• D. It deals in medium and long-term securities.

Hint:

The money market focuses on short-term instruments like Treasury bills and is primarily used by institutional participants for liquidity management.

Answer 1

The Correct Option is D

Step 1: Money Market Fundamentals.
- The money market is for short-term financial instruments (e.g., Treasury bills, Commercial paper) with maturities up to one year.
- Medium and long-term securities belong to the capital market, not the money market.
Step 2: Option Evaluation.
Option (D) is incorrect as it wrongly claims the money market handles medium and long-term securities.
Conclusion: The erroneous statement is (D) "It deals in medium and long-term securities."