B Com Exam > B Com Questions > What is the primary function of a money marke...
Start Learning for Free
What is the primary function of a money market?
- a)Providing long-term loans
- b)Facilitating international trade
- c)Meeting short-term funding needs
- d)Regulating inflation
Correct answer is option 'C'. Can you explain this answer?
Verified Answer
What is the primary function of a money market?a)Providing long-term l...
The money market primarily deals with short-term funds and provides liquidity to borrowers while meeting the short-term requirements of borrowers.
View all questions of this test
Most Upvoted Answer
What is the primary function of a money market?a)Providing long-term l...
Primary Function of a Money Market:
Money markets primarily serve the purpose of meeting short-term funding needs for individuals, businesses, and governments. Below are some key points explaining this function:
1. Source of Short-term Financing:
- Money markets provide a platform for entities to borrow or lend funds for short periods, usually less than a year.
- This short-term financing helps in meeting immediate cash flow requirements without the need for long-term commitments.
2. Liquidity Management:
- Money markets offer highly liquid and low-risk investment options such as treasury bills, commercial paper, and certificates of deposit.
- Investors can easily convert their investments into cash, making it a preferred choice for managing liquidity.
3. Interest Rate Benchmarking:
- Money market instruments such as commercial paper and repurchase agreements serve as benchmarks for short-term interest rates.
- These rates influence the overall cost of borrowing in the economy and play a crucial role in monetary policy decisions.
4. Capital Preservation:
- Due to their low-risk nature, money market investments focus on capital preservation rather than high returns.
- Investors looking to safeguard their principal amount often turn to money market instruments.
In conclusion, the primary function of a money market is to provide a platform for short-term borrowing and lending, facilitate liquidity management, serve as an interest rate benchmark, and prioritize capital preservation over high returns.
Money markets primarily serve the purpose of meeting short-term funding needs for individuals, businesses, and governments. Below are some key points explaining this function:
1. Source of Short-term Financing:
- Money markets provide a platform for entities to borrow or lend funds for short periods, usually less than a year.
- This short-term financing helps in meeting immediate cash flow requirements without the need for long-term commitments.
2. Liquidity Management:
- Money markets offer highly liquid and low-risk investment options such as treasury bills, commercial paper, and certificates of deposit.
- Investors can easily convert their investments into cash, making it a preferred choice for managing liquidity.
3. Interest Rate Benchmarking:
- Money market instruments such as commercial paper and repurchase agreements serve as benchmarks for short-term interest rates.
- These rates influence the overall cost of borrowing in the economy and play a crucial role in monetary policy decisions.
4. Capital Preservation:
- Due to their low-risk nature, money market investments focus on capital preservation rather than high returns.
- Investors looking to safeguard their principal amount often turn to money market instruments.
In conclusion, the primary function of a money market is to provide a platform for short-term borrowing and lending, facilitate liquidity management, serve as an interest rate benchmark, and prioritize capital preservation over high returns.
|
Explore Courses for B Com exam
|
|
Similar B Com Doubts
What is the primary function of a money market?a)Providing long-term loansb)Facilitating international tradec)Meeting short-term funding needsd)Regulating inflationCorrect answer is option 'C'. Can you explain this answer?
Question Description
What is the primary function of a money market?a)Providing long-term loansb)Facilitating international tradec)Meeting short-term funding needsd)Regulating inflationCorrect answer is option 'C'. Can you explain this answer? for B Com 2025 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about What is the primary function of a money market?a)Providing long-term loansb)Facilitating international tradec)Meeting short-term funding needsd)Regulating inflationCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for B Com 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for What is the primary function of a money market?a)Providing long-term loansb)Facilitating international tradec)Meeting short-term funding needsd)Regulating inflationCorrect answer is option 'C'. Can you explain this answer?.
What is the primary function of a money market?a)Providing long-term loansb)Facilitating international tradec)Meeting short-term funding needsd)Regulating inflationCorrect answer is option 'C'. Can you explain this answer? for B Com 2025 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about What is the primary function of a money market?a)Providing long-term loansb)Facilitating international tradec)Meeting short-term funding needsd)Regulating inflationCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for B Com 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for What is the primary function of a money market?a)Providing long-term loansb)Facilitating international tradec)Meeting short-term funding needsd)Regulating inflationCorrect answer is option 'C'. Can you explain this answer?.
Solutions for What is the primary function of a money market?a)Providing long-term loansb)Facilitating international tradec)Meeting short-term funding needsd)Regulating inflationCorrect answer is option 'C'. Can you explain this answer? in English & in Hindi are available as part of our courses for B Com.
Download more important topics, notes, lectures and mock test series for B Com Exam by signing up for free.
Here you can find the meaning of What is the primary function of a money market?a)Providing long-term loansb)Facilitating international tradec)Meeting short-term funding needsd)Regulating inflationCorrect answer is option 'C'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
What is the primary function of a money market?a)Providing long-term loansb)Facilitating international tradec)Meeting short-term funding needsd)Regulating inflationCorrect answer is option 'C'. Can you explain this answer?, a detailed solution for What is the primary function of a money market?a)Providing long-term loansb)Facilitating international tradec)Meeting short-term funding needsd)Regulating inflationCorrect answer is option 'C'. Can you explain this answer? has been provided alongside types of What is the primary function of a money market?a)Providing long-term loansb)Facilitating international tradec)Meeting short-term funding needsd)Regulating inflationCorrect answer is option 'C'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice What is the primary function of a money market?a)Providing long-term loansb)Facilitating international tradec)Meeting short-term funding needsd)Regulating inflationCorrect answer is option 'C'. Can you explain this answer? tests, examples and also practice B Com tests.
|
|
Explore Courses for B Com exam
|
|
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup