CA Intermediate · Financial Management and Strategic Management · Treasury and Cash Management
Which of the following is a money market instrument commonly used by corporate treasuries to park surplus cash for a short period?
Treasury bills are suitable for parking surplus cash because they are short-term, highly liquid and government-backed, with maturities up to 364 days. Equity shares, long-term debentures and ten-year preference shares involve longer tenure or price risk and are not money market instruments.
- ATreasury billsCorrect
- BEquity shares
- CLong-term debentures
- DPreference shares redeemable after 10 years
Explanation
Treasury bills are short-term, highly liquid, government-backed securities with maturities up to 364 days, ideal for parking surplus cash. Equity shares and long-term debentures or preference shares carry longer tenure or price risk.
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