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What is the purpose of a "Discount Market" in the money market?
- a)Facilitating foreign exchange transactions
- b)Providing loans against collateral
- c)Discounting short-term commercial bills
- d)Facilitating stock exchange transactions
Correct answer is option 'C'. Can you explain this answer?
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What is the purpose of a "Discount Market" in the money mark...
The Discount Market specializes in discounting short-term commercial bills, providing flexibility to banks and financing home and foreign trade.
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What is the purpose of a "Discount Market" in the money mark...
Discount Market in the money market plays a crucial role in providing short-term financing to businesses. Let's break down the purpose of a Discount Market:
- Discounting Short-term Commercial Bills: One of the main purposes of a Discount Market is to facilitate the discounting of short-term commercial bills. This involves purchasing these bills at a discount from their face value, providing immediate funds to the bill holder.
- Providing Short-term Financing: By allowing businesses to discount their commercial bills, the Discount Market provides them with access to short-term financing. This can help companies manage their cash flow and meet immediate financial obligations.
- Supporting Liquidity in the Market: The Discount Market helps in maintaining liquidity in the money market by providing a platform for the buying and selling of short-term financial instruments. This helps in ensuring that funds are available for businesses that need them.
- Facilitating Discounting Process: The Discount Market streamlines the discounting process by bringing together buyers and sellers of commercial bills. This makes it easier for businesses to access funds quickly by selling their bills at a discount.
In conclusion, the primary purpose of a Discount Market in the money market is to provide a mechanism for businesses to discount their short-term commercial bills, thereby obtaining immediate funds to meet their financial needs.
- Discounting Short-term Commercial Bills: One of the main purposes of a Discount Market is to facilitate the discounting of short-term commercial bills. This involves purchasing these bills at a discount from their face value, providing immediate funds to the bill holder.
- Providing Short-term Financing: By allowing businesses to discount their commercial bills, the Discount Market provides them with access to short-term financing. This can help companies manage their cash flow and meet immediate financial obligations.
- Supporting Liquidity in the Market: The Discount Market helps in maintaining liquidity in the money market by providing a platform for the buying and selling of short-term financial instruments. This helps in ensuring that funds are available for businesses that need them.
- Facilitating Discounting Process: The Discount Market streamlines the discounting process by bringing together buyers and sellers of commercial bills. This makes it easier for businesses to access funds quickly by selling their bills at a discount.
In conclusion, the primary purpose of a Discount Market in the money market is to provide a mechanism for businesses to discount their short-term commercial bills, thereby obtaining immediate funds to meet their financial needs.
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What is the purpose of a "Discount Market" in the money market?a)Facilitating foreign exchange transactionsb)Providing loans against collateralc)Discounting short-term commercial billsd)Facilitating stock exchange transactionsCorrect answer is option 'C'. Can you explain this answer?
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