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Question
Answer in brief.
State any four features of money market
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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 market which provides short term funds
Write a word or a term or a phrase which can substitute the following statement.
A money market instrument used by banks when one bank faces a temporary shortage of cash.
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
State whether the following statement is true or false
Secondary market is commonly known as stock market.
State whether the following statement is true or false
Treasury bills are issued by commercial banks.
Find the odd one.
Complete the sentence.
Funds borrowed and lent in money market are for ___________ term.
Complete the sentence.
In capital market the instruments traded have maturity period of more than ______ year.
Answer in one sentence.
What is Certificate of Deposits?
Answer in one sentence.
What is Trade Bill?
Correct the underlined word/s and rewrite the following sentence.
Financial market can be classified as capital market and call money market.
Explain the following term/concept.
Call money market
Explain the following term/concept.
Commercial bills
Answer in brief.
Explain any 4 types of money market instruments.
Justify the following statement.
Money market makes available short term finance through different instruments.
Justify the following statement.
There are many participants in money market.
Answer the following question
State the instruments in money market.
