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Ch.1 · Comparing Financial Products · medium

Which of the following correctly describes a 'call money' market?

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EXPLANATION

The call money market is an overnight (or up to 14 days — 'notice money') interbank market where banks lend and borrow funds to manage their daily cash reserve requirements. It is an integral part of the money market.

A.A market where corporates lend to each other overnight

B.An overnight interbank lending market where banks borrow and lend funds to manage daily liquidity [✓ Correct]

C.A market where investors place calls on equity options

D.A platform for small businesses to raise short-term working capital

EXPLANATION

The call money market is an overnight (or up to 14 days — 'notice money') interbank market where banks lend and borrow funds to manage their daily cash reserve requirements. It is an integral part of the money market.

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