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      Question

      What are Certificates of Deposits (CDs), and how are

      they used in the financial market?
      A Short-term debt instruments issued by banks to raise funds, typically used by institutional investors for liquidity management Correct Answer Incorrect Answer
      B Long-term bonds issued by the government, primarily for infrastructure funding, traded in the secondary market Correct Answer Incorrect Answer
      C Equity shares issued by companies, providing ownership stakes to investors, and traded on stock exchanges Correct Answer Incorrect Answer
      D Derivative contracts used to hedge against financial risks, commonly employed by large corporations Correct Answer Incorrect Answer
      E Digital currencies issued by central banks, aimed at enhancing transaction efficiency in the financial system Correct Answer Incorrect Answer

      Solution

      Certificates of Deposits (CDs) are short-term, negotiable debt instruments issued by banks to raise funds. They are widely used by institutional investors such as mutual funds and corporations to manage liquidity due to their low-risk and fixed-term nature. CDs are often traded in the secondary market, making them an important tool for managing short-term cash needs in the financial market.

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