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Direction: In the question given below are two statements labelled at Assertion (A) and Reason (R). In the context of the two statements, which one of the following is correct?
Assertion (A): Treasury Bills are issued by Central Government.
Reason (R): Treasury Bills are one of the safest money market instruments.
- a)Both A and R are true and R is the correct explanation of A
- b)Both A and R are true, but R is not the correct explanation of A
- c)A is true, but R is false
- d)A is false, but R is true
Correct answer is option 'A'. Can you explain this answer?
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Direction: In the question given below are two statements labelled at...
In India, the Central Government issues both, treasury bills and bonds or dated securities while the State Governments issue only bonds or dated securities, which are called the State Development Loans (SDLs).
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Direction: In the question given below are two statements labelled at...
Assertion (A): Treasury Bills are issued by Central Government.
Reason (R): Treasury Bills are one of the safest money market instruments.
The correct answer is option A, which means that both the Assertion and Reason are true, and the Reason is the correct explanation of the Assertion.
Explanation:
Treasury Bills, also known as T-Bills, are short-term debt instruments issued by the central government to raise funds for a short period, usually less than a year. They are typically issued at a discount to their face value and redeemed at their face value upon maturity. T-Bills are considered one of the safest money market instruments due to the following reasons:
T-Bills are backed by the central government: The central government issues T-Bills, which means they are backed by the full faith and credit of the government. This makes them virtually risk-free as the government has the power to tax and print currency to fulfill its financial obligations.
T-Bills have a low default risk: Since T-Bills are issued by the central government, they have a very low probability of default. The government has the ability to meet its debt obligations and repay the principal and interest on T-Bills.
T-Bills have a short maturity period: T-Bills have a maturity period of less than a year, typically ranging from 91 days to 364 days. The short duration reduces the risk of interest rate fluctuations and provides investors with quick liquidity.
T-Bills are highly liquid: T-Bills are actively traded in the secondary market, making them highly liquid. Investors can easily buy and sell T-Bills at prevailing market prices, allowing them to convert their investments into cash quickly if needed.
T-Bills provide a stable return: T-Bills are issued at a discount to their face value, and the difference between the discounted price and the face value represents the return for investors. This return is fixed and known in advance, providing stability to investors.
In conclusion, Treasury Bills are indeed issued by the central government, and they are considered one of the safest money market instruments due to the government's backing, low default risk, short maturity period, high liquidity, and stable returns. Therefore, both the Assertion and Reason are true, and the Reason correctly explains why T-Bills are considered safe.
Reason (R): Treasury Bills are one of the safest money market instruments.
The correct answer is option A, which means that both the Assertion and Reason are true, and the Reason is the correct explanation of the Assertion.
Explanation:
Treasury Bills, also known as T-Bills, are short-term debt instruments issued by the central government to raise funds for a short period, usually less than a year. They are typically issued at a discount to their face value and redeemed at their face value upon maturity. T-Bills are considered one of the safest money market instruments due to the following reasons:
T-Bills are backed by the central government: The central government issues T-Bills, which means they are backed by the full faith and credit of the government. This makes them virtually risk-free as the government has the power to tax and print currency to fulfill its financial obligations.
T-Bills have a low default risk: Since T-Bills are issued by the central government, they have a very low probability of default. The government has the ability to meet its debt obligations and repay the principal and interest on T-Bills.
T-Bills have a short maturity period: T-Bills have a maturity period of less than a year, typically ranging from 91 days to 364 days. The short duration reduces the risk of interest rate fluctuations and provides investors with quick liquidity.
T-Bills are highly liquid: T-Bills are actively traded in the secondary market, making them highly liquid. Investors can easily buy and sell T-Bills at prevailing market prices, allowing them to convert their investments into cash quickly if needed.
T-Bills provide a stable return: T-Bills are issued at a discount to their face value, and the difference between the discounted price and the face value represents the return for investors. This return is fixed and known in advance, providing stability to investors.
In conclusion, Treasury Bills are indeed issued by the central government, and they are considered one of the safest money market instruments due to the government's backing, low default risk, short maturity period, high liquidity, and stable returns. Therefore, both the Assertion and Reason are true, and the Reason correctly explains why T-Bills are considered safe.
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Direction: In the question given below are two statements labelled at Assertion (A) and Reason (R). In the context of the two statements, which one of the following is correct?Assertion (A): Treasury Bills are issued by Central Government.Reason (R): Treasury Bills are one of the safest money market instruments.a)Both A and R are true and R is the correct explanation of Ab)Both A and R are true, but R is not the correct explanation of Ac)A is true, but R is falsed)A is false, but R is trueCorrect answer is option 'A'. Can you explain this answer?
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Direction: In the question given below are two statements labelled at Assertion (A) and Reason (R). In the context of the two statements, which one of the following is correct?Assertion (A): Treasury Bills are issued by Central Government.Reason (R): Treasury Bills are one of the safest money market instruments.a)Both A and R are true and R is the correct explanation of Ab)Both A and R are true, but R is not the correct explanation of Ac)A is true, but R is falsed)A is false, but R is trueCorrect answer is option 'A'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Direction: In the question given below are two statements labelled at Assertion (A) and Reason (R). In the context of the two statements, which one of the following is correct?Assertion (A): Treasury Bills are issued by Central Government.Reason (R): Treasury Bills are one of the safest money market instruments.a)Both A and R are true and R is the correct explanation of Ab)Both A and R are true, but R is not the correct explanation of Ac)A is true, but R is falsed)A is false, but R is trueCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Direction: In the question given below are two statements labelled at Assertion (A) and Reason (R). In the context of the two statements, which one of the following is correct?Assertion (A): Treasury Bills are issued by Central Government.Reason (R): Treasury Bills are one of the safest money market instruments.a)Both A and R are true and R is the correct explanation of Ab)Both A and R are true, but R is not the correct explanation of Ac)A is true, but R is falsed)A is false, but R is trueCorrect answer is option 'A'. Can you explain this answer?.
Direction: In the question given below are two statements labelled at Assertion (A) and Reason (R). In the context of the two statements, which one of the following is correct?Assertion (A): Treasury Bills are issued by Central Government.Reason (R): Treasury Bills are one of the safest money market instruments.a)Both A and R are true and R is the correct explanation of Ab)Both A and R are true, but R is not the correct explanation of Ac)A is true, but R is falsed)A is false, but R is trueCorrect answer is option 'A'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Direction: In the question given below are two statements labelled at Assertion (A) and Reason (R). In the context of the two statements, which one of the following is correct?Assertion (A): Treasury Bills are issued by Central Government.Reason (R): Treasury Bills are one of the safest money market instruments.a)Both A and R are true and R is the correct explanation of Ab)Both A and R are true, but R is not the correct explanation of Ac)A is true, but R is falsed)A is false, but R is trueCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Direction: In the question given below are two statements labelled at Assertion (A) and Reason (R). In the context of the two statements, which one of the following is correct?Assertion (A): Treasury Bills are issued by Central Government.Reason (R): Treasury Bills are one of the safest money market instruments.a)Both A and R are true and R is the correct explanation of Ab)Both A and R are true, but R is not the correct explanation of Ac)A is true, but R is falsed)A is false, but R is trueCorrect answer is option 'A'. Can you explain this answer?.
Solutions for Direction: In the question given below are two statements labelled at Assertion (A) and Reason (R). In the context of the two statements, which one of the following is correct?Assertion (A): Treasury Bills are issued by Central Government.Reason (R): Treasury Bills are one of the safest money market instruments.a)Both A and R are true and R is the correct explanation of Ab)Both A and R are true, but R is not the correct explanation of Ac)A is true, but R is falsed)A is false, but R is trueCorrect answer is option 'A'. Can you explain this answer? in English & in Hindi are available as part of our courses for Commerce.
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