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 transaction. 4) ‘Zero-Coupon Bonds’ are the interest-bearing short-term bonds issued by the Scheduled Commercial Banks to corporations. Which of the pairs above is/are correctly matched?

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CollectorBabu · Accepted Answer

Correct Answer: 1 and 3 only. Commercial paper, in the global financial market, is an unsecured promissory note with a fixed maturity of rarely more than 270 days. Hence Statement 1 is correct A certificate of deposit is a time deposit, a financial product commonly sold by banks, thrift institutions, and credit unions. CDs differ from savings accounts in that the CD has a specific, fixed term and usually, a fixed interest rate. Hence statement 2 is incorrect. Call money rate is the rate at which short term funds are borrowed and lent in the money market. Hence statement 3 is correct. A zero-coupon bond is a debt security that does not pay interest but instead trades at a deep discount, rendering a profit at maturity, when the bond is redeemed for its full-face value. Hence Statement 4 is incorrect.

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