Question

Q3. Financial market is classified into money market and capital market. Which of the following are money market instruments?

1. Treasury Bills 2. Preference shares

3. Commercial papers

Select the correct answer using the codes given below

• A. (a) Only 1 and 2
• B. (b) Only 1 and 3
• C. (c) Only 2 and 3
• D. (d) All of the above

Answer 1

The correct option is B

(b) Only 1 and 3

The short-term debts and securities sold on the money markets—which are known as money market instruments—have maturities ranging from one day to one year and are extremely liquid. The Treasury bills are short-term money market instrument that matures in a year or less than that. Commercial Paper is a short-term loan that is issued by a corporation to be used for financing accounts receivable and inventories. Preference shares are a capital market instrument.