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

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BlackTom AI · Accepted Answer

Question 20 asks about statements regarding commercial bills and which one is incorrect. Carefully evaluating each option helps clarify.
Option A: 'Commercial bills are an important source of long-term finance for large and medium-sized firms.' This is not accurate because commercial bills are typically short-term instruments, often maturing in less than a year, used to meet working capital needs rather than long-term financing. Therefore, this statement is incorrect.
Option B: 'None of the options are incorrect.' Since we have identified at least one incorrect statement (Option A), this option cannot be true. Hence, Option B is incorrect as a blanket claim.
Option C: 'A commercial bill pays no periodic interest.' This is true. Commercial bills are discount instruments issued at a discount to their face value and do not pay periodic interest. The return to the holder comes from the difference between the face value and the discounted issue price at maturity.
Option D: 'The face value of a commercial bill is payable at a specified future date.' This is true as well. The instrument specifies a maturity date on which the face value is payable to the holder, fitting the standard discount instrument structure.
Option E: 'A commercial bill is a discount security.' This is also true. By definition, a commercial bill is issued at a discount and redeemed at its face value at maturity, which characterizes it as a discount security.
In summary, the statements that are factually correct align with the nature of commercial bills as short-term discount instruments with fixed maturity, while the incorrect statement is the notion that they are an important source of long-term financing (Option A), and the blanket 'None of the options are incorrect' (Option B) is also incorrect because A is false.

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