From the following, which is not a money market instrument?

Question

Accepted Answer

The correct option is 3:
The money market is defined as the market for short-term funds, dealing in financial assets that have a maturity period of one year or less, and its primary function is to provide liquidity to the financial system. In sharp contrast, a Preference Share is fundamentally an equity or hybrid security representing part-ownership in a company, used for long-term financing, which is the domain of the **capital market**. Preference shares do not have a maturity period of one year or less; they are part of a company’s permanent capital structure (or long-term debt/equity mix) and are thus correctly classified outside of the money market instruments.

The incorrect option is 1:
Treasury Bills (T-Bills) are short-term debt instruments issued by the government, often with maturities of 4, 8, 13, 26, or 52 weeks, which is always one year or less. Due to their ultra-short maturity, low risk (backed by the government), and high liquidity, they are a classic and essential instrument of the money market. They are specifically used by the government to manage its short-term cash needs and by financial institutions to park temporary surplus funds.

The incorrect option is 2:
Commercial Paper (CP) is an unsecured, short-term promissory note issued by large, highly creditworthy corporations to raise funds directly from the public for short-term needs like working capital. By definition, CP has a fixed maturity period that does not exceed one year. Therefore, it perfectly fits the criterion of being a money market instrument, allowing corporations to access the money market for short-term debt financing.

The incorrect option is 4:
Call Money refers to the lending and borrowing of funds between banks for a very short period, typically one day (overnight). If the period is between two days and up to 14 days, it is known as Notice Money. Since this is the market for immediate or near-immediate liquidity needs for periods of 14 days or less, it represents the most liquid segment of the money market and is, without a doubt, a core money market instrument.