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Explain the following money market instruments:a. Treasury Billb. Commercial Paper |
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Answer» Following is the brief description of money market instruments: a. Treasury Bill: Treasury Bill means that short term instrument which the Central Government issues to the financial institutions or the general public in order to meet its short-term financial needs. Usually their maturity period is 14 days, 91 days, 182 days and 364 days. Treasury bills are of highly liquid nature because the RBI is ever-ready to buy them on discount. They are issued at less than the face value while the payment is made at the face value. b. Commercial Paper (CP): Commercial Papers are those unsecured Promissory Notes which are issued by well-reputed companies. The minimum face value of a commercial paper is five lakh rupees. It is used to meet the demand of a short term seasonal need and the requirement of working capital. They are issued for a period of 15 days to 12 months. |
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