UPSC General Studies Sample Paper General Studies Sample Paper-5

  • question_answer
    Consider the following statements regarding security market.
    1. Futures are securities or commodities sold or bought with the assumption of delivery at a later stage.
    2. If the Reserve Bank of India sells security in the market, it will result in mopping up of excess liquidity in the economy.
    3. Capital market means financial market dealing in long-term funds.
    Which of the statements given above are correct?

    A)  1 and 2           

    B)  2 and 3

    C)  1 and 3           

    D)  All of these

    Correct Answer: D

    Solution :

    [d] Futures are financial contract obligating the buyer to purchase an asset, such as a physical commodity or a financial instrument, at a predetermined future date and price. Future contracts detail the quantity and quality of the underlying asset. The Reserve Bank of India through Open Market Operation buys and sells government securities in open market to control the supply of money in banking system. A capital market is a market, for securities (debt or equity), where business enterprises (companies) and governments can raise long-term funds. It is defined as a market, in which money is provided for periods longer than a year as the raising of short-term funds takes place on other markets (e.g. the money market). So, all of the above statements are correct. 

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