CMA Intermediate · Financial Management and Business Data Analytics · Money Market
Which of the following is a money market instrument issued by a scheduled commercial bank against funds deposited for a fixed period and is freely transferable after the date of issue (lock-in rules apart)?
A Certificate of Deposit is the correct answer. It is a negotiable, usufruct-free short-term deposit instrument issued by scheduled commercial banks for a fixed period and traded in the money market. Equity shares, preference shares and ten-year debentures are long-term capital market instruments, not bank deposit certificates.
- ACertificate of DepositCorrect
- BEquity share
- CPreference share
- DDebenture with 10-year maturity
Explanation
A Certificate of Deposit is an unsecured, negotiable short-term deposit instrument issued by banks and is a money market instrument. Equity, preference shares and 10-year debentures are capital market instruments and not bank deposit certificates.
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