CA Intermediate · Financial Management and Strategic Management · Types of Financing
Which instrument is an unsecured, short-term money market instrument issued by highly rated corporates to raise funds, usually for maturities between 7 days and one year?
Commercial paper is correct. It is an unsecured short-term promissory note issued at a discount by highly rated companies, with maturity from 7 days to one year. Debentures, preference shares and term loans are longer-term sources of finance.
- ADebenture
- BCommercial paperCorrect
- CPreference share
- DTerm loan
Explanation
Commercial paper is an unsecured, unsecured promissory note issued at a discount by creditworthy companies for short periods ranging from 7 days to one year. Debentures and term loans are longer-term, and preference shares are equity-type capital.
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