CA Foundation · Business Economics · Money Market
Which of the following money market instruments is issued by a scheduled commercial bank to raise funds from depositors, is a negotiable instrument, and is issued in dematerialised form at a discount to face value?
The Certificate of Deposit is the correct answer. It is an unsecured, negotiable money market instrument issued by banks against funds deposited, in dematerialised form and at a discount. Commercial Paper is issued by corporates, Treasury Bills by the government, and call money is simply short-term interbank borrowing.
- ACertificate of DepositCorrect
- BCommercial Paper
- CCall money
- DTreasury Bill
Explanation
A Certificate of Deposit is an unsecured, negotiable, usually discounted instrument issued by banks (and certain financial institutions) against funds deposited. Commercial Paper is issued by companies, primary dealers and similar entities, not by banks to raise deposits. Call money is a borrowing arrangement, not a negotiable instrument, and a Treasury Bill is issued by the government.
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