Which of the following is NOT a type of capital market instrument?

Correct option is C

A capital market instrument is a financial security used for long-term funding, typically with a maturity of more than one year. These instruments are primarily used for investment, raising capital for companies, and include equity shares, preference shares, debentures, and bonds.
· Equity Shares (a): These are the most common instruments in the capital market, representing ownership in a company. Shareholders have voting rights and may receive dividends.
· Debentures (b): These are long-term debt instruments used by companies to raise funds. They pay interest to investors and are repaid at maturity.
· Preference Shares (d): These shares offer fixed dividends to shareholders and have a higher claim on assets than equity shares.
Why is Commercial Paper NOT a Capital Market Instrument?Commercial Paper (CP) is a short-term money market instrument with a maturity period ranging from 7 days to 1 year. It is issued by corporations to raise short-term funds and is not used for long-term capital raising. Since the capital market deals with long-term instruments, CP falls under the money market rather than the capital market.
Information Booster:
1. Capital Market: Deals with long-term financial instruments like equities, bonds, and debentures with maturities exceeding one year.
2. Money Market: Focuses on short-term instruments (maturity up to 1 year) such as Commercial Paper, Treasury Bills, and Certificates of Deposit.
3. Equity Shares vs. Preference Shares:
· Equity shares provide ownership and voting rights but have variable dividends.
· Preference shares offer fixed dividends and priority over equity shares in case of liquidation.
4. Debentures vs. Bonds:
· Debentures are unsecured long-term debt instruments.
· Bonds are secured and often issued by governments or large corporations.
5. Role of SEBI: In India, the Securities and Exchange Board of India (SEBI) regulates capital markets and ensures investor protection.
6. Primary vs. Secondary Market:
· Primary Market: Where companies issue new securities (e.g., IPOs).
· Secondary Market: Where investors trade already-issued securities (e.g., stock exchanges).