CA Foundation · Business Economics · Money Market
A corporate treasurer of Sundaram Motors wants to raise short-term funds by issuing an unsecured, negotiable promissory note in the money market, relying on the firm's high credit rating and not offering any collateral. This instrument is best called:
The instrument is commercial paper. It is an unsecured, negotiable short-term promissory note issued by highly rated companies to raise funds directly from the market. Treasury bills are government instruments, call money is interbank lending, and repos involve securities as collateral.
- ACommercial paperCorrect
- BTreasury bill
- CCall money
- DRepo
Explanation
Commercial paper is an unsecured, negotiable short-term promissory note issued by creditworthy corporates. Treasury bills are issued by the government, call money is an interbank overnight loan, and a repo is a sale of securities with an agreement to repurchase, so it is secured.
Did you get it right without looking?
One question tells you little. A timed set on Money Market shows your real accuracy, how long you take and where you lose marks.
More Money Market questions
- Starting from money market equilibrium, the central bank conducts open market purchases of government securities, increasing money supply wh…
- Which of the following money market instruments is a short-term instrument issued by the Government of India and carries no default risk?
- Which of the following is a feature of the Treasury Bill as a money market instrument in India?
- In the RBI's money supply framework, reserve money (H) is also called high-powered money. Which of the following correctly lists its compone…
- Which of the following best describes the primary function of the Liquidity Adjustment Facility (LAF) in India's monetary framework?
- In the standard model of money market equilibrium, with money supply fixed by the central bank, what happens to the interest rate when the i…