CA Foundation · Business Economics · Money Market
Which of the following money market instruments is a short-term instrument issued by the Government of India and carries no default risk?
The Treasury Bill is correct. It is a short-term security issued by the Government of India through the RBI, so it is considered free of default risk. Commercial Paper, Certificates of Deposit and trade bills are issued by companies, banks or traders and carry credit risk.
- ATreasury BillCorrect
- BCommercial Paper
- CCertificate of Deposit
- DBill of exchange drawn by a trader
Explanation
Treasury Bills are short-term government securities issued by the Government of India through RBI, so they are regarded as free of default risk. CPs, CDs and trade bills are issued by private or banking entities and carry some credit risk.
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