CA Foundation · Business Economics · Money Market
Which statement about Commercial Paper (CP) in India is correct?
Commercial Paper is an unsecured short-term promissory note, issued at a discount to face value by creditworthy companies and financial institutions. It is not secured, not long-term, not issued by the government as a debenture, and carries no ownership or voting rights like equity.
- AIt is an unsecured short-term promissory note issued at a discount by highly rated corporatesCorrect
- BIt is a secured long-term debenture issued by the government
- CIt is a deposit receipt issued only by cooperative banks
- DIt is an equity instrument giving voting rights
Explanation
Commercial Paper is an unsecured, negotiable promissory note issued at a discount to face value by corporates, primary dealers and financial institutions with good credit ratings, to raise short-term funds. It is not long-term, not a government debenture and not equity.
Did you get it right without looking?
One question tells you little. A timed set on Money Market shows your real accuracy, how long you take and where you lose marks.
More Money Market questions
- In an economy, money demand is Md = 500 − 20r, where r is the interest rate in percent, and the central bank initially fixes the money suppl…
- Banks in India borrow from the Reserve Bank under the Marginal Standing Facility (MSF) against approved securities. The MSF rate is set at:
- A corporate treasurer of Sundaram Motors wants to raise short-term funds by issuing an unsecured, negotiable promissory note in the money ma…
- Which of the following best describes the role of the money market in an economy?
- According to the liquidity preference approach, which pair of factors mainly determines the equilibrium rate of interest in the money market…
- Which of the following best describes the role of the money market in relation to the economy's need for funds?