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Question

' Rakesh Steel Lts.' is a large and creditworthy company manufacturing steel for the Indian market. It now wants to cater to the Asian market and decides to invest in new hi-tech machines. Since the investment is large, it requires long term finance. It decides to raise funds by issuing equity shares. the issue of equity shares involves huge flotation cost. To meet the expenses of flotation cost the company decides to tap the money market.

Name the money market instrument the company can use for the above purpose.

A
Call Money
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B
Comemrcial Bill
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C
Commercial Paper
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D
Treasury Bill
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Solution

The correct option is C Commercial Paper
Commercial Paper: It is the unsecured promissory note issued by large and credit-worthy companies to raise short term funds at lower rates of interest than the prevailing market rates.

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