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Question
Answer in brief.
State any four features of money market
Solution
The money market is a market for lending and borrowing of funds for short-term which varies from one day to a year.
The features of the money market are as follows:
1) The funds borrowed and lent in the money market are for the short-term. The maximum period for which the funds are traded in the market is one year.
2) It is a wholesale market for short-term debt as the transaction volume is large.
3) Trading may take place over the telephone, after which written confirmation is done by way of e-mails.
4) Participants of the money market include RBI, commercial banks, mutual funds, financial institutions, primary dealers, and corporates.
5) There is an impersonal relationship between the participants of the money market.
6) Money market has no geographical area i.e. there is no fixed place for carrying out transactions.
7) The instruments of the money market can be converted easily into cash or have very short maturity periods. Moreover, the returns on investment are also low.
8) Major segments of the money market are
i. Call money market
ii. Certificate of deposits market
iii. Treasury bill market
iv. Commercial bill market
v. Commercial papers market
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RELATED QUESTIONS
Match the pair.
| Group ‘A’ | Group ‘B’ |
| a) Financial market | 1) Long term fund |
| b) Money market | 2) New issue market |
| c) Primary market | 3) Trading of commodities |
| d) Commercial paper | 4) Short term fund |
| 5) Trading of financial securities | |
| 6) Share market | |
| 7) Unsecured promissory note | |
| 8) Secured promissory note |
Write a word or a term or a phrase which can substitute the following statement.
A bill which is issued by Reserve Bank of India on behalf of the Government of India.
Write a word or a term or a phrase that can substitute the following statement.
A market that exclusively deals with the new issue of securities
Find the odd one.
Select the correct option from the bracket.
| Group ‘A’ | Group ‘B’ |
| a) Money market | 1) ____________ |
| b) Zero risk instrument | 2) _____________ |
| c) __________ | 3) Capital market |
| d) __________ | 4) Secondary market |
(Buying and selling of existing securities, Treasury Bills, Funds for long term, Fund for short term)
Answer in one sentence.
What is Certificate of Deposits?
Answer in one sentence.
What is Trade Bill?
Explain the following term/concept.
Money market
Explain the following term/concept.
Call money market
Explain the following term/concept.
Treasury bills
Explain the following term/concept.
Commercial bills
Answer the following question
State the instruments in money market.
Study the following case/situation and express your opinion.
| Joy ltd. company is a newly incorporated company. It wants to raise capital for the first time by issuing equity shares. |
- Should it go to the primary market or secondary market to issue its shares?
- Should it offer its shares through public offers or rights issues?
- What will be the issue of Equity shares by Joy Ltd. co. called, IPO or FPO?
