ACCA Financial Management (F9) Certification Practice Exam

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Prepare for the ACCA Financial Management (F9) Certification Exam with engaging quizzes and interactive content. Dive deep into financial management concepts and boost your exam confidence with questions that come with detailed explanations.

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Which of the following best describes money market deposits?

Very long-term investments with high returns
Short-term loans with variable interest rates
Very short-term loans between banks, could be fixed or call deposits
Investments in agricultural products

The correct answer is: Very short-term loans between banks, could be fixed or call deposits

The best description of money market deposits is indeed that they involve very short-term loans between banks, which can be either fixed or call deposits. Money market deposits are a key component of the money market, characterized by their high liquidity and short maturities, typically ranging from overnight to one year. Financial institutions often engage in these transactions to manage their liquidity needs effectively. During these interbank transactions, banks lend to each other to ensure they have enough cash to meet their short-term obligations. 'Call deposits' refer to deposits that can be withdrawn on demand, while 'fixed' denotes deposits that are locked in for a predetermined period. The nature of money market deposits aligns well with their purpose and operational mechanics within the financial system, emphasizing their essential role in facilitating liquidity among banks. Other options do not adequately capture the characteristics of money market deposits, as they either refer to long-term investments or unrelated sectors.