CSEET · Economic and Business Environment · Indian Financial Markets
Which of the following best describes Commercial Paper (CP) in the Indian money market?
Commercial Paper is an unsecured, usance promissory note issued at a discount by eligible corporates and institutions to raise short-term funds. It is not a secured long-term bond, not a government dated security, and not a post office deposit.
- AAn unsecured, usance promissory note issued at a discount by eligible corporates to raise short-term fundsCorrect
- BA secured long-term bond backed by company assets
- CA government-issued dated security with a coupon
- DA deposit receipt issued by a post office
Explanation
Commercial Paper is an unsecured money market instrument issued as a promissory note, typically at a discount, by creditworthy corporates, primary dealers and financial institutions for short maturities. A secured long-term bond is a debenture, and government dated securities are issued by the Centre or states.
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