CA Intermediate · Financial Management and Strategic Management · Treasury and Cash Management
Which of the following instruments is a money market instrument commonly used by a corporate treasurer to park short-term surplus cash?
Commercial paper is the money market instrument. It is a short-term unsecured instrument, with maturity up to one year, suitable for parking surplus cash, whereas equity shares, irredeemable preference shares and long-term debentures are long-term capital market instruments.
- AEquity shares of a listed company
- BCommercial paperCorrect
- CIrredeemable preference shares
- DLong-term debentures
Explanation
Money market instruments have short maturities (up to one year) and include treasury bills, commercial paper, certificates of deposit and call money. Equity, irredeemable preference shares and long-term debentures are capital market instruments with long or indefinite tenor and higher price risk.
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