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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Introduction to the Indian Financial Markets

Ms. Kavita Rao, a client of an investment adviser, wants to park surplus cash for 60 days in a Government of India instrument with zero default risk, issued at a discount and redeemed at face value. Which instrument is most suitable?

A 91-day Treasury Bill is most suitable because it is a Government of India short-term instrument, issued at a discount and redeemed at face value, with no default risk. Commercial paper, certificates of deposit and debentures carry issuer credit risk.

  1. ACommercial paper issued by a corporate
  2. BCertificate of deposit issued by a bank
  3. C91-day Treasury BillCorrect
  4. DNon-convertible debenture of a public sector company

Explanation

Treasury bills are issued by the Government of India at a discount and redeemed at face value, carrying sovereign credit quality. Commercial paper and certificates of deposit carry issuer credit risk, and NCDs are typically longer term and also carry credit risk.

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