Which of the following is a capital market instrument?
10-year US Treasury note
6-month commercial paper (CP) issued by a US corporation
Bank overdraft given to a small US corporate borrower
1-month US Treasury bill
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We are provided with a few instruments and we are asked out of them which is a capital market instrument. The capital market instrument will be the first option - a 10-year US Treasury note.
- Capital market tools guarantee a smooth flow of money across an economy.
- They contribute to the balanced growth of the economy by encouraging investments and savings by transferring excess cash from investors to those in need of financing for expansion.
- Primary and secondary markets are the two segments of the capital market.
- Some of the instruments used in the capital market are bonds, stocks, securities, etc.
- The main factor influencing the decision whether it is a capital market instrument is the length or period of the instruments which from the options provided will be the first option.
- Therefore, The capital market instrument will be the first option - a 10-year US Treasury note.
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