Question

Explain the Instruments of Money Market?

Answer 1

1. Treasury Bills: Treasury bills are very popular and enjoy a higher degree of liquidity since they are issued by the Government. A Treasury bill is nothing but a promissory note issued for a specified period stated therein. The Government promises to pay the specified amount mentioned therein to the bearer of the instrument on the due date. The period does not exceed a period of one year.
2. Certificate of Deposits: Certificate of Deposits are short-term deposit instruments issued by banks and financial institutions to raise large sums of money. The Certificate of Deposit is transferable from one party to another. Due to their negotiable feature, they are also known as negotiable certificates of deposit.
3. Commercial Bills: The Commercial Bill is an instrument drawn by a seller of goods on a buyer of goods. It possesses the advantages like self-liquidating in nature, recourse to two parties, knowing exact date of transactions, transparency of transactions, etc.,