Table of Contents
What are the different money market instruments?
Following are the types of Money Market Instruments:
- Promissory Note: A promissory note is one of the earliest type of bills.
- Bills of exchange or commercial bills.
- Treasury Bills (T-Bills)
- Call and Notice Money.
- Inter-bank Term Market.
- Commercial Papers (CPs)
- Certificate of Deposits ( CD’s )
- Banker’s Acceptance (BA)
What is the purpose of money market instruments?
Money market instruments are financial instruments which are issued with a maturity of one year or less. They provide a market for investors to earn a return on liquid assets; borrowers who need short-term liquidity have access to these funds; and they provide the Fed with a means to effect monetary policy.
What is the features of money market?
Features of Money Market It is market purely for short-term funds or financial assets called near money. It deals with financial assets having a maturity period up to one year only. It deals with only those assets which can be converted into cash readily without loss and with minimum transaction cost.
What is money market explain?
Definition: Money market basically refers to a section of the financial market where financial instruments with high liquidity and short-term maturities are traded. Money market consists of various financial institutions and dealers, who seek to borrow or loan securities.
What is the difference between money market instruments and capital market instruments?
A money market is a component of financial market where short-term borrowing can be issued. This market includes assets that deal with short-term borrowing, lending, buying and selling. A capital market is a component of a financial market that allows long-term trading of debt and equity-backed securities.
What are the features of money market and capital market?
Top 10 Differences between Money Market and Capital Market
| Money Market | Capital Market |
|---|---|
| Purpose served | |
| To achieve short term credit requirements of the trade. | To achieve long term credit requirements of the trade. |
| Functions served | |
| Increasing liquidity of funds in the economy | Stabilising economy by increase in savings |
Which of the following is an example of a money market instrument?
Treasury bills, federal agency notes, certificates of deposit (CDs), eurodollar deposits, commercial paper, bankers’ acceptances, and repurchase agreements are examples of instruments.
What is the correct features of Indian money market?
Indian Money Market is characterized by diversity in interest rates. Prime examples are the Government borrowing rates, deposit and lending rates of commercial banks, deposit and lending rates of co-operative banks and so on.
What is difference between financial market and capital market?
The financial market is where all trades involving financial assets happen. The capital market is where companies and governments go to raise long-term capital.
What are three main differences between money and capital markets?
Comparing Money Market and Capital Market
| Comparison Point | Money Market | Capital Market |
|---|---|---|
| Examples | Certificates of Deposit (CD), Treasury Bills, Commercial Paper | Stock shares and Bonds |
| Duration | Short term (1 year or less) | Long term (greater than 1 year) |
| Investment objective | Maintain wealth | Generate wealth |
| Level of risk | Low | High |
What is the purpose of a money market instrument?
What are Money Market Instruments. As the name suggests, money market instrument is an investment mechanism that allows banks, businesses, and the government to meet large, but short-term capital needs at a low cost. They serve the dual purpose of allowing borrowers meet their short-term requirements and providing easy liquidity to lenders.
What are the different types of money market instruments in India?
Types of Money Market Instruments in India. 1 1. Treasury Bills. T-bills are one of the most popular money market instruments. They have varying short-term maturities. The Government of India 2 2. Commercial Bills. 3 3. Certificate of Deposit. 4 4. Commercial Paper. 5 5. Call Money.
What are the characteristics of a money market?
What are the characteristics of money market instruments? 1 It is a financial market and has no fixed geographical location. 2 It is a market for short term financial needs, for example, working capital needs. 3 It’s primary players are the Reserve Bank of India (RBI), commercial banks and financial institutions like LIC, etc.,
How are money market instruments traded over the counter?
The money market and its instruments are usually traded over the counter, and therefore, cannot be done by standalone individual investors themselves. It has to be done through certified brokers, or a money market mutual fund. What are the Types of Money Market Instruments?