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With reference to Government Security (G-Sec), consider the following statements
1. It is a tradable instrument which can be issued by both the Central and the State Governments.
2. It carries a high risk of default.
Which of the statements given above are correct?
  • a)
    1 only
  • b)
    2 only
  • c)
    Both 1 and 2
  • d)
    Neither 1 nor 2
Correct answer is option 'A'. Can you explain this answer?
Verified Answer
With reference to Government Security (G-Sec), consider the following ...
Statement 1 is correct: A Government Security (G-Sec) is a tradable instrument issued by the Central Government or the State Governments. It acknowledges the Government’s debt obligation. Such securities are short term (usually called treasury bills, with original maturities of less than one year) or long term (usually called Government bonds or dated securities with an original maturity of one year or more).
Statement 2 is not correct: In India, the Central Government issues both, treasury bills and bonds or dated securities while the State Governments issue only bonds or dated securities, which are called the State Development Loans (SDLs). G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments.
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With reference to Government Security (G-Sec), consider the following statements1. It is a tradable instrument which can be issued by both the Central and the State Governments.2. It carries a high risk of default.Which of the statements given above are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?
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