Identify the incorrect statement(s), regarding money market, among the following : (a) The call money market deals in short term finance repayable on demand, with a maturity period varying from one day to 14 days. (b) Treasury bills are instruments of short-term borrowing by the Government of India, issued as promissory notes under discount. (c) A reduction in the repo rate helps banks to get money at a cheaper rate. (d) Money market mutual funds invest money in specifically, high-quality and very short maturity-based money market instruments. Codes :
None of the above
(a) In the call/notice money market, money lent overnight is call money and money lent for 2 to 14 days is notice money; together they cover short-term funds repayable on demand within one to fourteen days, which is the standard textbook description. The statement is correct.
(b) Treasury bills are short-term borrowing instruments of the Government of India (91, 182 and 364 days), issued as promissory notes at a discount and redeemed at face value. Correct.
(c) The repo rate is the rate at which the RBI lends to banks against government securities. A cut in the repo rate makes this borrowing cheaper for banks. Correct.
(d) Money market mutual funds invest only in high-quality, very short-term money market instruments such as treasury bills, commercial paper, certificates of deposit, CBLO and repos. Correct.
Since every statement is correct, there is no incorrect statement among them.
Hence, None of the above.
Similar Questions
Assertion (A) : A well developed money market is the basis for an effective monetary policy. It is in the money market that the Central Bank comes into contact with the financial sectors of the economy as a whole and it is through the liquidity in the market that influence the cost and availability of credit.
Reasoning (R) : A well organised money market is an essential condition for the successful operation of the Central Banking policies, and for holding the conditions of liquidity within the bounds of what the monetary authorities consider desirable.
What is Call Money ?
LIBOR term is used for :
Important Questions from Money Market
The interest rate at which the Reserve Bank absorbs liquidity from banks under the Liquidity Adjustment Facility (LAF), on an overnight basis, against the collateral of eligible government securities, is called _____.
When the general interest rate reaches a very low level, which of the following statements will be correct?
Which of the following statements are true in context of efficient market?
A. Equilibrium rates of return will prevail
B. Investor cannot earn a positive return
C. Volatility will be very high
D. Securities of listed firms sell at their fair values
E. Investors are generally risk-averse
Choose the most appropriate answer from the options given below:
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