Question

What are the two primary securities issued when corporate raise capital?



a. money markets and capital markets

b. treasury bills and treasury notes

c.bonds and stocks

d. commercial paper and banknotes

Answer 1

The two primary securities which are issued when a corporate raises capital are:

Option (C) : Bonds and Stocks

REASON:

• Money markets and capital markets are the two types of financial markets in which the financial assets are transacted. While money market is a market for short term debt transactions, capital market, on the other hand, is a market for long term financial assets such as shares, bonds, debentures, mutual funds units, etc. So, Option (A) is invalid.
• Treasury bills, treasury bonds, treasury notes are issued by the government (not by corporates). These are generally considered to be safe and secure and offers a fixed income. Option (B) is invalid.
• Stocks and bonds are considered as the primary securities through which a corporate raises its capital. These securities such as equity shares, preference shares, debentures, bonds, etc. provide long term financing options for corporates which can help them in future growth. Option (C) holds true.
• Commercial paper is a money market security issued by corporates for meeting their short term financing obligations whereas a bank note is a type of a promissory note wherein a bank promises to pay to the bearer on demand. These are rarely used means for raising funds and are generally meant for short term. Option (D) is invalid.