Read the following case study and answer questions.

Company X raised 10,00,000 through issue of shares in open market to raise funds to establish the business of selling electronic goods. Later on for procuring funds for next six months, Company X was dependent on sources like commercial paper, and commercial bill. The issue of share done in open market was oversubscribed due to good reputation of company. These sources help the company to mobilise a large amount of money for long as well as short run. The business succeeded in its operations using these funds.

It is short term finance, repayable on demand with a maturity of one day to fifteen days used for inter-bank transactions. Name it.

Call Money

The correct answer is Option (4) - Call Money.

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. Commercial banks have to maintain a minimum cash balance known as cash reserve ratio. The Reserve Bank of India changes the cash reserve ratio from time to time which in turn affects the amount of funds available to be given as loans by commercial banks.

* 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.

* 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. Treasury bills are issued in the form of a promissory note. They are highly liquid and have assured yield and negligible risk of default. They are issued at a price which is lower than their face value and repaid at par. The difference between the price at which the treasury bills are issued and their redemption value is the interest receivable on them and is called discount.

* 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.