| Equity market instruments help in financing a firm. Which of these is/are equity market instruments? |
| 1. Bonds |
| 2. Shares |
| 3. Debentures |
| Select the correct answer using the codes given below. |
A) 1 and 2 only
B) 2 only
C) 2 and 3 only
D) 1, 2 and 3
Correct Answer: B
Solution :
[b] 2 only. Shares are equity instruments, while bonds and debentures are debt instruments. Debt instruments are assets that require a fixed payment to the holder, usually with interest. Examples of debt instruments include bonds (government or corporate), debentures and mortgages. Equity financing allows a company to acquire funds (often for investment) without incurring debt, eg. shares.
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