Financial securities that mature in less than a year are classified as which type of securities?

The correct option is this Money market securities.

In Finance MCQs, distinguishing between short-term and long-term financial instruments is a fundamental concept in capital markets and liquidity management. Money market securities are financial instruments with maturities of less than one year. They are primarily used by governments, corporations, and financial institutions to meet short-term funding requirements, manage cash flows, or invest idle funds with minimal risk. Common examples include Treasury bills (T-bills), commercial paper, repurchase agreements (repos), and certificates of deposit (CDs) with maturities under 12 months.

These securities are highly liquid, low-risk, and typically considered safe investments, making them ideal for investors seeking capital preservation and predictable returns over a short period. Unlike long-term instruments, money market securities are not intended for capital growth but serve as a key tool in cash management strategies for both individual and institutional investors.

Reviewing the incorrect options helps clarify their distinctions:

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  Saving intermediaries: is incorrect because it refers to institutions that facilitate savings, such as banks or credit unions, not to short-term securities.

  
  


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  Discounted intermediaries: is also incorrect. While some money market instruments, like Treasury bills, are sold at a discount, the term itself is not recognized as a category of financial securities.

  
  


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  Capital market securities: are incorrect because instruments such as stocks and bonds generally have maturities exceeding one year and are used for long-term financing rather than short-term liquidity management.

  
  

Understanding money market securities is crucial in financial planning and capital management:

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  Liquidity management: Corporations and financial institutions use these securities to meet short-term obligations and manage daily cash flows efficiently.

  
  


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  Low-risk investment: Backed by governments or stable corporations, money market instruments offer predictable returns and capital preservation, appealing to risk-averse investors.

  
  


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  Market efficiency: Money market securities facilitate short-term funding and investment, supporting stability in the financial system.

  
  


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  Portfolio diversification: Incorporating money market securities helps investors balance risk and maintain liquidity while waiting for long-term investment opportunities.

  
  

From an exam perspective, Finance MCQs frequently test the ability to differentiate between money market and capital market securities, focusing on maturity periods, risk profiles, and purposes. Knowing that money market securities mature in less than one year and are used for short-term funding is essential to answer such questions correctly.

In conclusion, financial securities with maturities under one year are classified as money market securities. They provide liquidity, low-risk investment opportunities, and an essential tool for short-term financial management. Therefore, in Finance MCQs, the correct answer is Money market securities, making option C the right choice.