ACCA FM · Chapter 2 · Question 6 of 10
Which money market instrument is a negotiable certificate issued by a bank, confirming that a sum has been deposited for a fixed period at a stated rate of interest?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Certificate of deposit
Explanation
A certificate of deposit (CD) is issued by a bank in exchange for a fixed-term deposit, and because it is negotiable the holder can sell it in the money market before maturity. Treasury bills are issued by government, commercial paper is unsecured short-term debt issued by large companies, and a banker's acceptance is a bill of exchange guaranteed by a bank.
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