CA Intermediate · Financial Management and Strategic Management · Treasury and Cash Management
Which instrument is a short-term unsecured promissory note issued by creditworthy corporates at a discount to face value, commonly used to park or raise short-term funds in the money market?
Commercial paper is the correct answer. It is an unsecured short-term promissory note issued by creditworthy corporates at a discount and redeemed at face value, whereas debentures and preference shares are long-term and treasury bills are government securities.
- ACommercial paperCorrect
- BDebenture
- CPreference share
- DTreasury bill issued by RBI
Explanation
Commercial paper is an unsecured, discounted money market instrument issued by corporates. Debentures and preference shares are long-term, and treasury bills are issued by the government, not corporates.
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