Consider the following statements regarding investment instruments:
1. Investing in a company’s equity shares carries a higher risk compared to investing in its debentures.
2. Government securities are regarded as the safest form of debt instruments.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Question

Consider the following statements regarding investment instruments:
1. Investing in a company&rsquo;s equity shares carries a higher risk compared to investing in its debentures.
2. Government securities are regarded as the safest form of debt instruments.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

ONLiNE UPSC · Accepted Answer

Statement 1 is correct: Investment in equity issues is generally riskier compared to debentures of the same company because equity investors face higher uncertainty regarding returns and have a lower claim on assets in case of liquidation compared to debenture holders.

Statement 2 is correct: Government securities are backed by the government's guarantee, ensuring repayment of the principal amount and interest upon maturity. This guarantee minimizes the risk of default, making them highly secure investments.

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M Question 1	⏱ 0
Consider the following statements regarding investment instruments: 1. Investing in a company’s equity shares carries a higher risk compared to investing in its debentures. 2. Government securities are regarded as the safest form of debt instruments. Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2