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      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: ο‚· Treasury Bills (T-Bills) – Issued by the government for short-term borrowing. ο‚· Certificates of Deposit (CDs) – Fixed-term deposits issued by banks. ο‚· Commercial Paper (CPs) – Unsecured promissory notes issued by companies. ο‚· Repo Agreements (Repurchase Agreements) – Short-term borrowing against securities.

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