The maximum duration of instruments traded in money market is:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → 12 Months
Option (1) 18 Months — Incorrect. Eighteen months is more than a year, so this belongs to the capital market.
Option (2) 12 Months — Correct. The money market is the market for short-term funds, repaid in one year or less. Twelve months is that limit, and every instrument of the money market stays within it. A treasury bill runs from 14 days to 364 days. Commercial paper runs from 15 days to one year. A certificate of deposit runs from 91 days to one year. Call money may be for a single day. None of them can be issued for longer, because an instrument that runs beyond a year is not a money-market instrument at all.
Option (3) 1 day — Incorrect. One day is the shortest period in this market, not the longest. It is the period of call money. The money market runs from one day at the lowest end to one year at the highest end, and the question asks for the highest.
Option (4) 5 years — Incorrect. Five years is long-term finance, and it belongs to the capital market.
Note: Although the chapter ‘Financial Markets’ was dropped from the NCERT textbooks during rationalisation, it has stayed in the NTA syllabus every year since 2022, except for 2025, and it is part of the syllabus again from 2026. This question is therefore based on the pre-rationalised NCERT, an extract from which is given below. NCERT (Pre-rationalised Edition): “The money market is a market for short term funds which deals in monetary assets whose period of maturity is upto one year. These assets are close substitutes for money. …” “(iv) Duration: The capital market deals in medium and long term securities such as equity shares and debentures. Money market instruments have a maximum tenure of one year, and may even be issued for a single day.” |