BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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On which of the following instruments is the rate of return calculated on a ‘discount basis’?
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Commercial paper
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Commercial bills
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Both 1 and 2
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Neither 1 nor 2
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Explanation:
Detailed explanation-1: -The yield or return on Treasury bills and discount bonds is usually calculated either on the basis of Discount Yield method or instead the Yield to Maturity method.
Detailed explanation-2: -On which of the following instruments is the rate of return calculated on a ‘discount basis’? Notes: Discount instruments are money market instruments that are issued at a value less than (or “discounted” from) their stated face value and mature for their face value.
Detailed explanation-3: -Treasury Bills (T-bills) The rate of return, also known as the risk-free rate, is low on T-bills as compared to all other instruments.
There is 1 question to complete.