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Question
Explain the following Money Market Instruments:
Treasury bill
Solution
Treasury bills (T-Bills): A treasury bill is a short-term borrowing instrument of the Government of India. It is a promissory note having a maturity period of less than one year. T-bills are issued by the Reserve Bank of India on behalf of the Central Government.
RELATED QUESTIONS
‘Zaira Ltd.’ is a large and creditworthy company manufacturing air-conditioned buses for the Indian market. It now wants to export these buses to other countries and decides to invest in new hi-tech machines. Since the investment is large, it requires long-term finance. It decides to raise funds by issuing equity shares. The issue of equity shares involves huge floatation cost. To meet the expenses of floatation cost, the company decides to tap the money market.
a. Name and explain the money market instrument the company can use for the
above purpose.
b. What is the duration for which the company can get funds through this instrument?
c. State any other purpose for which this instrument can be used.
Differentiate between `capital-market' and 'money-market' on the following basis:
Duration
Differentiate between `capital-market' and 'money-market' on the following basis:
Liquidity
Differentiate between 'capital-market' and 'money-market' on the basis of:
Expected return;
Differentiate between 'capital-market' and 'money-market' on the basis of:
Meaning;
Explain the following Money Market Instruments:
Commercial paper
Explain the following Money Market Instruments:
Call money
State any four functions of 'Secondary - Market'.
Capital market is a market for ______.
Primary market is also called as ______.
Spot Market is a market where the delivery of the financial instrument and payment of cash occurs
What is Debt Market?
Differentiate Spot Market from Future Market.
Write a note on Secondary Market.
Vedansh Limited has a share capital of ₹10,00,000 divided into shares of ₹100 each.For expansion purposes, the company requires additional funds of ₹ 5,00,000. The management is considering the following alternatives for raising funds :
Alternative 1: Issue of 5000 Equity shares of ₹100 each
Alternative 2: Issue of 10% Debentures of Rs. 5,00,000
The company’s present Earnings Before Interest and Tax ( EBIT) is ₹4,00,000 p.a. Assuming that the Rate of Return of Investment remains the same after expansion, which alternative should be used by the company in order to maximise the returns to the equity shareholders. The Tax rate is 50%. Show the working.
