CMA Foundation · Fundamentals of Business Economics and Management · Money and Banking
Which one of the following is a money market instrument issued by a bank to raise short-term funds, being a negotiable time deposit instrument?
A Certificate of Deposit is the correct answer. It is a negotiable short-term deposit instrument issued by banks to raise funds and is traded in the money market. Equity shares, preference shares and long-dated debentures are long-term capital market instruments, not money market instruments.
- AEquity share
- BCertificate of DepositCorrect
- CDebenture with 10-year maturity
- DPreference share
Explanation
A Certificate of Deposit (CD) is a negotiable, short-term deposit instrument issued by banks and certain financial institutions and is traded in the money market. Equity shares, preference shares and 10-year debentures are long-term capital market instruments.
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