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Question

Difficulty: EasyThe Capital Market: Stock Exchange, Securities, and Trading

Which of the following financial instruments is traded on the capital market to raise long-term debt capital for a company?

  1. DebenturesAnswer
  2. B
    Treasury Bills
  3. C
    Commercial Papers
  4. D
    Banker's Acceptances

Answer

Debentures are long-term debt securities traded on the capital market to secure long-term loan funds for corporate enterprises.
Debentures are long-term debt instruments issued by public limited companies to borrow capital from the investing public through the capital market, making them the correct choice.

Step-by-Step Solution

1
Identify the market type and tenure requested
The target instrument must operate in the capital market for long-term debt financing.
The capital market specializes in medium- and long-term funds, whereas the money market deals in short-term debt.
2
Evaluate the financial instruments listed
Treasury Bills, Commercial Papers, and Banker's Acceptances are short-term money market instruments, whereas Debentures represent long-term debt securities.
Debentures carry fixed interest payments and mature over longer time horizons exceeding one year.

Key Concept

Capital Market Instruments vs Money Market Instruments
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Topics

The Capital Market: Stock Exchange, Securities, and Trading

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