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CA Intermediate · Financial Management and Strategic Management · Types of Financing

Which of the following instruments is a short-term money market instrument issued by a highly rated corporate as an unsecured, unsecured-promissory-note form of borrowing, usually at a discount to face value?

Commercial paper is the correct answer. It is an unsecured short-term money market instrument issued by highly rated companies at a discount to face value and redeemed at par on maturity. Debentures and GDRs are long-term, and venture capital is risk funding for start-ups.

  1. ADebenture
  2. BCommercial paperCorrect
  3. CVenture capital
  4. DGlobal depository receipt

Explanation

Commercial paper is an unsecured money market instrument issued by creditworthy corporates, normally at a discount and redeemed at face value. Debentures are long-term, venture capital is equity-type funding for start-ups, and GDRs are equity-linked instruments issued abroad.

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