CA Foundation · Business Economics · Money Market
Which of the following is NOT a characteristic of money market instruments?
Money market instruments are short-term in nature, typically maturing within one year. Long-term securities with 5-10 year maturities belong to the capital market, not the money market. This distinguishes money market from capital market securities.
- AHigh liquidity and short maturity period
- BLower credit risk compared to capital market securities
- CIssued primarily by central banks and governments
- DLong-term maturity ranging from 5 to 10 yearsCorrect
Explanation
Money market instruments are defined by their short-term nature, typically maturing within one year. Treasury bills, commercial paper, and call money all have maturities of less than 12 months. Long-term securities (5-10 years) belong to the capital market, not the money market. The 5-10 year maturity range is the key distractor that misrepresents the defining feature of money market instruments.
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