Question

Assertion (A): Certificates of Deposit (CD) are secured, negotiable, long-term instruments in bearer form.

Reason (R): A rise in call money rates makes other sources of finance such as commercial paper and certificates of deposit cheaper in comparison as banks raise funds from these sources.

Options

• Both (A) and (R) are true, and (R) is the correct explanation of (A).

• Both (A) and (R) are true, but (R) is not the correct explanation of (A).

• (A) is true, but (R) is false.

• (A) is false, but (R) is true.

Answer 1

(A) is false, but (R) is true.

Explanation - 

Commercial banks and development financial organisations issue Certificates of Deposit (CDs), which are unsecured, negotiable, short-term instruments in bearer form.