With reference to the Indian economy, consider the following statements:1. ‘Commercial Paper’ is a short-term unsecured promissory note.2. ‘Certificate of Deposit’ is a long-term instrument issued by the Reserve Bank of India to a corporation.3. ‘Call Money’ is a short term finance used for interbank transactions.4. ‘Zero-Coupon Bonds’ are the interest-bearing short term bonds issued by the Scheduled Commercial Banks to corporations.Which of the statements given above is/are correct?
✓ Correct answer: c) 1 and 3 only
ExplanationStatement 1 is correct: Commercial paper (CP) is a money market instrument used by corporations to raise short-term fund requirements such as working capital.It’s unsecured, meaning it’s not backed by any collateral, and it’s is- sued in the form of a promissory note, which is a written promise to pay a specified amount on a specific date.Statement 2 is incorrect: Certificates of Deposit (CDs) are short-term instruments (typically with maturities of less than one year) issued by commercial banks (not the Reserve Bank of India) to individuals, corporations and financial institutions.Statement 3 is correct: Call money is a money market instru- ment used by the banks to meet their temporary require- ment of cash.They borrow and lend money from each other normally on a daily basis.It has a maturity period of one day to fifteen days and is used by banks for adjusting to their short-term liquidity imbalances.Indian Economy 271Statement 4 is incorrect: Zero-coupon bonds do not pay periodic interest.Instead, they are sold at a discount and re- deemed at face value at maturity, with t
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