Question20 Which of the following statements about commercial bills is incorrect? The face value of a commercial bill is payable at a specified future date Commercial bills are an important source of long-term finance for large and medium-sized firms A commercial bill pays no periodic interest A commercial bill is a discount security None of the options are incorrect ResetMaximum marks: 1 Flag question undefined

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BlackTom AI · Accepted Answer

Let's break down each statement about commercial bills to see what holds true and what doesn't.
Option 1: The face value of a commercial bill is payable at a specified future date. This is correct. Commercial bills are short-term debt instruments that are payable at maturity on a specified date, representing the face value to be paid then.
Option 2: Commercial bills are an important source of long-term finance for large and medium-sized firms. This is inaccurate. Commercial bills are typically short-term instruments used to finance working capital needs and liquidity, not long-term financing for firms. They are issued with maturities ranging from a few days to up to a year, usually well short of long-term funding horizons.
Option 3: A commercial bill pays no periodic interest. This statement is correct. Commercial bills are discount securities; the holder purchases the bill for less than its face value, and interest is implied by the discount rather than paid as periodic interest.
Option 4: A commercial bill is a discount security. This is true. By definition, commercial bills are issued at a discount to their face value and redeemed at par at maturity, with the difference representing implicit interest.
Option 5: None of the options are incorrect. Since Option 2 is incorrect, this statement is itself incorrect.

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