Question

Which of the following are not Capital Market Instruments (choose the best answer)? a.Repo's b.T-Bills c.Treasury Strips d.Commercial Paper e.Two of these are not Capital Market Instruments f.Three of these are not Capital Market instruments g. None of these are Capital Market Instruments

Answer 1

T-Bills, Treasury Strips, and Commercial Paper are not Capital Market Instruments.

Step-by-step explanation:

T-Bills, Treasury Strips, and Commercial Paper are not Capital Market Instruments.

T-Bills are short-term securities issued by the government to finance its short-term expenses. They have a maturity of less than one year and are traded in the money market.

Treasury Strips are Treasury bonds that have been broken down into separate interest and principal components. They are not actively traded in the capital market.

Commercial Paper is a short-term unsecured promissory note issued by corporations to meet their short-term financing needs. It is typically traded in the money market.

Therefore, the correct answer is f: Three of these are not Capital Market Instruments.

Answer 2

T-Bills and Commercial Paper are short-term instruments, which are part of Money Markets, not Capital Markets. Repo's are often short-term as well and can also be classified in Money Markets. Therefore, the answer is that two of these are not Capital Market Instruments.

Step-by-step explanation:

The question is asking to identify which of the listed instruments are not Capital Market instruments. Capital Markets are markets where money is loaned for more than one year. Instruments such as corporate bonds, government bonds, and long-term certificates of deposit are typically considered Capital Market instruments because they involve lending for periods longer than a year. On the other hand, Money Markets are for lending money for periods shorter than a year.

Among the options given: Repo's (repurchase agreements), T-Bills (Treasury Bills), and Commercial Paper are all instruments used in Money Markets as they are short-term instruments with maturities typically less than one year. Treasury Strips, however, can be considered a Capital Market instrument, as they are created from the separation of the interest and principal of Treasury bonds and notes and have maturities ranging up to 30 years.

So, the correct answer would be: e. Two of these are not Capital Market Instruments; specifically, T-Bills and Commercial Paper are not Capital Market instruments, while Repo's could also fit under this category depending on their term. Treasury Strips are part of the Capital Market.