GK
BANKING AWARENESS AND SEBI
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Certificate of deposit is issued at discount while commercial paper at face value
|
|
|
Certificate of deposit is a financial instrument while commercial paper is a financial statement
|
|
|
Certificate of deposit is issued by banks while commercial paper is issued by firms or public limited companies
|
|
|
All of the above
|
Detailed explanation-1: -The first is who can issue them. A CD is issued by financial institutions and banks. Commercial papers are issued by primary dealers, large corporations and All-India Financial Institutions. The second difference is the minimum amount of deposit.
Detailed explanation-2: -Both bond loans and commercial paper loans are convertible fixed-income securities. In principle, these loan products are quite similar, but commercial papers have a shorter term and are usually more standardised than bond loans. The loans normally have an interest-only period and are repaid in full when they fall due.
Detailed explanation-3: -CDs have shorter tenures, whereas FDs come with varying investment tenures. The minimum investment amount for CDs is INR 1 lakh, whereas you can invest in FDs with just INR 1000. FDs can be used as collateral to avail of loans, whereas CDs cannot. FDs are relatively low risk, but CDs can offer better returns.
Detailed explanation-4: -The commercial paper refers to short-term promissory notes that are negotiable and easily transferred amongst financial institutions. They are unsecured, although, in financial markets, they are used as credits for maintaining the cash reserve ratio.