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Which among the following statements is correct regarding the interconnectedness of the capital market?
(i) Bond markets and money markets move in tandem, whereas capital markets (equity) move in the opposite direction.
(ii) An increase in bond yields leads to a decline in stock markets
(iii) A decrease in bond yields results in higher stock market indices.
(iv) Equity markets generally move negatively with bond yields.
(i) Bond markets and money markets move in tandem, whereas capital markets (equity) move in the opposite direction.
(ii) An increase in bond yields leads to a decline in stock markets
(iii) A decrease in bond yields results in higher stock market indices.
(iv) Equity markets generally move negatively with bond yields.
- a)(i), (ii) & (iii)
- b)(i), (iii) & (iv)
- c)(ii), (iii) & (iv)
- d)All/None of the above
Correct answer is option 'D'. Can you explain this answer?
Verified Answer
Which among the following statements is correct regarding the intercon...
There is interconnectedness in the capital market, the relationship between bond markets and money markets move in tandem, while the capital market (equity) moves in the opposite direction.
- An increase in bond yields leads to a decline in stock markets, and a decrease in bond yields results in higher stock market indices.
- While there are exceptions, Equity markets generally move negatively with bond yields. That means as bond yields go down, the equity markets tend to outperform by a bigger margin, and as bond yields go up equity markets tend to fall.
Most Upvoted Answer
Which among the following statements is correct regarding the intercon...
Understanding Capital Market Interconnectedness
The interconnectedness of capital markets involves complex relationships, particularly between bond markets and stock markets. Let's analyze the statements presented.
Statement Analysis:
- (i) Bond markets and money markets move in tandem, whereas capital markets (equity) move in the opposite direction.
This statement is generally considered incorrect. Typically, bond markets and equity markets react based on interest rate changes, but they don't always move in completely opposite directions.
- (ii) An increase in bond yields leads to a decline in stock markets.
This statement is often true. When bond yields rise, bonds become more attractive compared to stocks, leading to capital shifting away from equities, which can depress stock prices.
- (iii) A decrease in bond yields results in higher stock market indices.
This statement is also generally true. Lower bond yields make borrowing cheaper and increase the attractiveness of equities, often resulting in higher stock prices.
- (iv) Equity markets generally move negatively with bond yields.
This statement is true as well. Rising bond yields usually signal higher interest rates, which can negatively impact equity markets.
Conclusion:
Given the analysis, the statements (ii), (iii), and (iv) are correct, while statement (i) contains inaccuracies. Therefore, the correct answer is option 'D', indicating that all statements cannot be deemed correct.
Understanding this interplay is crucial for investors and analysts in making informed decisions in capital markets.
The interconnectedness of capital markets involves complex relationships, particularly between bond markets and stock markets. Let's analyze the statements presented.
Statement Analysis:
- (i) Bond markets and money markets move in tandem, whereas capital markets (equity) move in the opposite direction.
This statement is generally considered incorrect. Typically, bond markets and equity markets react based on interest rate changes, but they don't always move in completely opposite directions.
- (ii) An increase in bond yields leads to a decline in stock markets.
This statement is often true. When bond yields rise, bonds become more attractive compared to stocks, leading to capital shifting away from equities, which can depress stock prices.
- (iii) A decrease in bond yields results in higher stock market indices.
This statement is also generally true. Lower bond yields make borrowing cheaper and increase the attractiveness of equities, often resulting in higher stock prices.
- (iv) Equity markets generally move negatively with bond yields.
This statement is true as well. Rising bond yields usually signal higher interest rates, which can negatively impact equity markets.
Conclusion:
Given the analysis, the statements (ii), (iii), and (iv) are correct, while statement (i) contains inaccuracies. Therefore, the correct answer is option 'D', indicating that all statements cannot be deemed correct.
Understanding this interplay is crucial for investors and analysts in making informed decisions in capital markets.
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Which among the following statements is correct regarding the intercon...
There is interconnectedness in the capital market, the relationship between bond markets and money markets move in tandem, while the capital market (equity) moves in the opposite direction.
- An increase in bond yields leads to a decline in stock markets, and a decrease in bond yields results in higher stock market indices.
- While there are exceptions, Equity markets generally move negatively with bond yields. That means as bond yields go down, the equity markets tend to outperform by a bigger margin, and as bond yields go up equity markets tend to fall.
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Which among the following statements is correct regarding the interconnectedness of the capital market?(i) Bond markets and money markets move in tandem, whereas capital markets (equity) move in the opposite direction.(ii) An increase in bond yields leads to a decline in stock markets(iii) A decrease in bond yields results in higher stock market indices.(iv) Equity markets generally move negatively with bond yields.a)(i), (ii) & (iii)b)(i), (iii) & (iv)c)(ii), (iii) & (iv)d)All/None of the aboveCorrect answer is option 'D'. Can you explain this answer?
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Which among the following statements is correct regarding the interconnectedness of the capital market?(i) Bond markets and money markets move in tandem, whereas capital markets (equity) move in the opposite direction.(ii) An increase in bond yields leads to a decline in stock markets(iii) A decrease in bond yields results in higher stock market indices.(iv) Equity markets generally move negatively with bond yields.a)(i), (ii) & (iii)b)(i), (iii) & (iv)c)(ii), (iii) & (iv)d)All/None of the aboveCorrect answer is option 'D'. Can you explain this answer? for Bank Exams 2025 is part of Bank Exams preparation. The Question and answers have been prepared according to the Bank Exams exam syllabus. Information about Which among the following statements is correct regarding the interconnectedness of the capital market?(i) Bond markets and money markets move in tandem, whereas capital markets (equity) move in the opposite direction.(ii) An increase in bond yields leads to a decline in stock markets(iii) A decrease in bond yields results in higher stock market indices.(iv) Equity markets generally move negatively with bond yields.a)(i), (ii) & (iii)b)(i), (iii) & (iv)c)(ii), (iii) & (iv)d)All/None of the aboveCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for Bank Exams 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which among the following statements is correct regarding the interconnectedness of the capital market?(i) Bond markets and money markets move in tandem, whereas capital markets (equity) move in the opposite direction.(ii) An increase in bond yields leads to a decline in stock markets(iii) A decrease in bond yields results in higher stock market indices.(iv) Equity markets generally move negatively with bond yields.a)(i), (ii) & (iii)b)(i), (iii) & (iv)c)(ii), (iii) & (iv)d)All/None of the aboveCorrect answer is option 'D'. Can you explain this answer?.
Which among the following statements is correct regarding the interconnectedness of the capital market?(i) Bond markets and money markets move in tandem, whereas capital markets (equity) move in the opposite direction.(ii) An increase in bond yields leads to a decline in stock markets(iii) A decrease in bond yields results in higher stock market indices.(iv) Equity markets generally move negatively with bond yields.a)(i), (ii) & (iii)b)(i), (iii) & (iv)c)(ii), (iii) & (iv)d)All/None of the aboveCorrect answer is option 'D'. Can you explain this answer? for Bank Exams 2025 is part of Bank Exams preparation. The Question and answers have been prepared according to the Bank Exams exam syllabus. Information about Which among the following statements is correct regarding the interconnectedness of the capital market?(i) Bond markets and money markets move in tandem, whereas capital markets (equity) move in the opposite direction.(ii) An increase in bond yields leads to a decline in stock markets(iii) A decrease in bond yields results in higher stock market indices.(iv) Equity markets generally move negatively with bond yields.a)(i), (ii) & (iii)b)(i), (iii) & (iv)c)(ii), (iii) & (iv)d)All/None of the aboveCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for Bank Exams 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which among the following statements is correct regarding the interconnectedness of the capital market?(i) Bond markets and money markets move in tandem, whereas capital markets (equity) move in the opposite direction.(ii) An increase in bond yields leads to a decline in stock markets(iii) A decrease in bond yields results in higher stock market indices.(iv) Equity markets generally move negatively with bond yields.a)(i), (ii) & (iii)b)(i), (iii) & (iv)c)(ii), (iii) & (iv)d)All/None of the aboveCorrect answer is option 'D'. Can you explain this answer?.
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Which among the following statements is correct regarding the interconnectedness of the capital market?(i) Bond markets and money markets move in tandem, whereas capital markets (equity) move in the opposite direction.(ii) An increase in bond yields leads to a decline in stock markets(iii) A decrease in bond yields results in higher stock market indices.(iv) Equity markets generally move negatively with bond yields.a)(i), (ii) & (iii)b)(i), (iii) & (iv)c)(ii), (iii) & (iv)d)All/None of the aboveCorrect answer is option 'D'. Can you explain this answer?, a detailed solution for Which among the following statements is correct regarding the interconnectedness of the capital market?(i) Bond markets and money markets move in tandem, whereas capital markets (equity) move in the opposite direction.(ii) An increase in bond yields leads to a decline in stock markets(iii) A decrease in bond yields results in higher stock market indices.(iv) Equity markets generally move negatively with bond yields.a)(i), (ii) & (iii)b)(i), (iii) & (iv)c)(ii), (iii) & (iv)d)All/None of the aboveCorrect answer is option 'D'. Can you explain this answer? has been provided alongside types of Which among the following statements is correct regarding the interconnectedness of the capital market?(i) Bond markets and money markets move in tandem, whereas capital markets (equity) move in the opposite direction.(ii) An increase in bond yields leads to a decline in stock markets(iii) A decrease in bond yields results in higher stock market indices.(iv) Equity markets generally move negatively with bond yields.a)(i), (ii) & (iii)b)(i), (iii) & (iv)c)(ii), (iii) & (iv)d)All/None of the aboveCorrect answer is option 'D'. Can you explain this answer? theory, EduRev gives you an
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