Which of the following is issued by commercial banks at a discount on face value?
Show answer & explanation
Correct answer: B
Explanation
The correct answer is option 2 i.e. Certificates of deposits.
Certificates of Deposit (CDs) are financial instruments issued by commercial banks that represent a time deposit. These CDs are sold at a discount to their face value, meaning investors purchase them for less than their nominal amount. Upon maturity, the bank redeems the CD at its full face value, allowing investors to earn interest over the term of the deposit. This makes CDs an attractive option for individuals looking for a low-risk investment with guaranteed returns. The discounted nature of CDs provides liquidity while ensuring a fixed interest yield, appealing to both individual and institutional investors.