If a company is already in liquidity crunch and flotation costs of the issue would be high. What kind of instrument will be appoints for the money market.

FINANCIAL MARKETS

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

A	Commercial Bills
B	Commercial paper
C	Treasury Bill
D	COD

Explanation:

Detailed explanation-1: -Answer. To meet the floatation cost company can use commercial paper as a money market instrument. its duration is 3 months to 12 months . it helps to cover flotation cost which is known as bridge financing .

Detailed explanation-2: -Money market instruments include Bills of Exchange or Commercial Bills, Treasury Bills (T-Bills), Commercial Papers (CP), Certificate of Deposits (CD), Repurchase Agreements, Banker’s Acceptance and Call & Notice Money. Capital market instruments include bonds and stocks.

Detailed explanation-3: -Answer: The method of floatation used by the company is ‘Rights Issue’.

Detailed explanation-4: -Definition. Long-term finance can be defined as any financial instrument with maturity exceeding one year (such as bank loans, bonds, leasing and other forms of debt finance), and public and private equity instruments.

There is 1 question to complete.

ECONOMICS (CBSE/UGC NET)

ECONOMICS

FINANCIAL MARKETS