Correct Option
Statement 1: Commercial Paper (CP) is an unsecured money market instrument. It is issued by highly rated corporations and primary dealers to raise short-term funds, typically for periods ranging from 7 days to one year. This aligns with the definition of a short-term unsecured promissory note.
Statement 3: Call Money refers to the borrowing and lending of funds on an overnight basis between banks. It is primarily used by banks to manage their daily liquidity requirements and maintain Cash Reserve Ratio (CRR). This confirms its role as a short-term finance for interbank transactions.
Incorrect Options
Statement 2: A Certificate of Deposit (CD) is a short-term, not long-term, negotiable money market instrument. It is issued by Scheduled Commercial Banks and select All-India Financial Institutions (AIFIs) to individuals, corporations, and funds, not by the Reserve Bank of India.
Statement 4: Zero-Coupon Bonds are debt instruments that do not pay interest periodically. Instead, they are issued at a discount to their face value and redeemed at par upon maturity, with the difference constituting the investor's return. They are typically long-term instruments and are issued by governments or corporations, not primarily by Scheduled Commercial Banks to corporations as interest-bearing short-term bonds.