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 for short-term surplus cash, issued at a discount and repaid at face value?
Treasury bill is the correct answer. It is a short-term, low-risk government money market instrument issued at a discount to face value and redeemed at par on maturity, making it ideal for investing temporary surplus cash. The other choices are long-term capital market securities.
- AEquity share
- BDebenture with 10-year maturity
- CTreasury billCorrect
- DPreference share
Explanation
Treasury bills are short-term government securities issued at a discount and redeemed at face value, making them suitable for parking surplus cash. Equity shares, long-dated debentures and preference shares are capital market instruments with longer horizons or uncertain value.
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