CA Foundation · Business Economics · Money Market
Which of the following best explains why the money market is said to provide a reasonable return to investors with temporary surplus funds while keeping risk low?
Money market instruments are short-term and are generally issued by borrowers of high credit standing such as the government, banks and highly rated companies. Short maturity and strong credit quality keep risk low while still giving a reasonable return on temporary surplus funds.
- AIts instruments are short-term and issued by borrowers of high credit standingCorrect
- BIts instruments have no maturity date
- CIts instruments are always equity-based
- DIts instruments can be traded only after ten years
Explanation
Money market instruments mature within a year and are generally issued by governments, banks or highly rated firms, so price and credit risk are low. They have maturities, are debt-type, and are not locked in for ten years.
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
- In an economy, money demand is L = 600 − 25r (₹ crore, r in %). Initially the money supply is ₹350 crore. The central bank raises supply to …
- Aarav Industries, a highly rated company, issues Commercial Paper of face value ₹5,00,000 for 90 days at a discount, receiving ₹4,85,000 on …
- Which of the following is a selective (qualitative) instrument of credit control rather than a general quantitative tool of the RBI?
- Which one of the following statements about Treasury Bills (T-bills) in India is correct?
- In a money market initially in equilibrium, the central bank keeps the money supply unchanged but the public's demand for money rises at eve…
- In the RBI's classification of money supply, which of the following correctly defines M1 (narrow money)?