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    Question

    Term Money in a financial market can be defined

    as____
    A Money borrowed for a day or overnight Correct Answer Incorrect Answer
    B Money borrowed for more than one day but up to 14 days Correct Answer Incorrect Answer
    C Money borrowed for more than 14 days but up to 1 year Correct Answer Incorrect Answer
    D Money borrowed for more than 1 year Correct Answer Incorrect Answer
    E None of these Correct Answer Incorrect Answer

    Solution

    The money market primarily facilitates lending and borrowing of funds between banks and entities like Primary Dealers (PDs). Banks and PDs borrow and lend overnight or for the short period to meet their short term mismatches in fund positions. This borrowing and lending is on unsecured basis. ·         ‘Call Money’ is the borrowing or lending of funds for 1day. ·         Where money is borrowed or lend for period between 2 days and 14 days it is known as ‘Notice Money’. ·         ‘Term Money’ refers to borrowing/lending of funds for period exceeding 14 days but to 1 year More than 1 year is not a part of money market but capital market.

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