Q.____ is an unsecured, short-term promissory note issued by large, creditworthy companies to raise working-capital funds.

This tests whether a student can tell apart the four money-market instruments by WHO issues each and WHAT it is secured by.

Commercial Paper (CP) is an unsecured, short-term promissory note issued at a discount by large, financially sound and creditworthy companies (and certain other eligible entities) to raise funds directly from the market for their working-capital needs, rather than borrowing from a bank. Being unsecured, it is available only to issuers with a good credit rating, and its maturity in India ranges from a minimum of seven days up to a maximum of one year.

Option (a), Treasury Bills, are issued by the RBI on behalf of the GOVERNMENT, not by companies, and carry a sovereign guarantee rather than being unsecured company paper. Option (c), Certificate of Deposit, is issued by BANKS and financial institutions against funds actually deposited with them, not by a company raising funds from the market at large. Option (d), Call Money, is short-term borrowing and lending BETWEEN BANKS to manage daily liquidity, not an instrument a company is …

A common wrong choice is (c) Certificate of Deposit, since both CP and CD are discount, money-market instruments — the deciding difference is the ISSUER: a company issues Commercial Paper, while a bank or …