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IAI Actuarial Core Principles · Business Economics · Role, structure and stability of the financial system

Which of the following instruments would normally be traded in the money market rather than the capital market?

A 91-day Treasury bill is traded in the money market, which handles short-term, highly liquid debt of up to about a year. Equity shares, long-dated debentures, irredeemable preference shares and 30-year government bonds are long-term or perpetual claims and belong to the capital market.

  1. ATreasury bills with 91 days to maturityCorrect
  2. BOrdinary equity shares of a listed company
  3. CA 10-year corporate debenture
  4. DIrredeemable preference shares
  5. A 30-year government bond

Explanation

The money market deals in short-term, highly liquid debt, usually of less than a year, such as Treasury bills, commercial paper and certificates of deposit. The other instruments are long-term or perpetual and belong to the capital market.

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