Practicing Success

Target Exam

CUET

Subject

Business Studies

Chapter

Financial Markets

Question:

Match the following:

1. Treasury bill A. Short term finance repayable on demand, with a maturity period of one day to fifteen days, used for inter-bank transactions.
2. Commercial paper B. Used by large and creditworthy companies to raise short term funds at lower ROI than market rates
3. Call money C. A bill of exchange used to finance the working capital requirements of business firms.
4. Commercial bill D. Also known as zero coupon bonds
Options:

1-A, 2-B, 3-D, 4-C

1-C, 2-B, 3-A, 4-D

1-D, 2-B, 3-A, 4-C

1-B, 2-D, 3-C, 4-A

Correct Answer:

1-D, 2-B, 3-A, 4-C

Explanation:

Treasury bill:  A Treasury bill is basically an instrument of short-term borrowing by the Government of India maturing in less than one year. They are also known as Zero Coupon Bonds issued by the Reserve Bank of India on behalf of the Central Government to meet its short-term requirement of funds.

Commercial paper: Commercial paper is a short-term unsecured promissory note, negotiable and transferable by endorsement and delivery with a fixed maturity period. It is issued by large and creditworthy companies to raise short-term funds at lower rates of interest than market rates. It usually has a maturity period of 15 days to one year.

Call money: Call money is short term finance repayable on demand, with a maturity period of one day to fifteen days, used for inter-bank transactions. Call money is a method by which banks borrow from each other to be able to maintain the cash reserve ratio. The interest rate paid on call money loans is known as the call rate.

Commercial bill: A commercial bill is a bill of exchange used to finance the working capital requirements of business firms. It is a short-term, negotiable, self-liquidating instrument which is used to finance the credit sales of firms.