Question

    Which of the following instruments is commonly used by

    banks to manage short-term liquidity needs?
    A Treasury Bills Correct Answer Incorrect Answer
    B Certificate of Deposit Correct Answer Incorrect Answer
    C Commercial Paper Correct Answer Incorrect Answer
    D Repo Agreements Correct Answer Incorrect Answer
    E All of the above Correct Answer Incorrect Answer

    Solution

    Banks use various instruments for short-term liquidity management:  Treasury Bills (T-Bills) – Issued by the government for short-term borrowing.  Certificates of Deposit (CDs) – Fixed-term deposits issued by banks.  Commercial Paper (CPs) – Unsecured promissory notes issued by companies.  Repo Agreements (Repurchase Agreements) – Short-term borrowing against securities.

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