Investment Management

Features and Objectives of Money Market

Money market is a market for short-term loan or financial assets. It as a market for the lending and borrowing of short term funds. As the name implies, it does not actually deals with near substitutes for money or near money like trade bills, promissory notes and government papers drawn for a short period not exceeding one year. These short term instruments can be converted into cash readily without any loss and at low transaction cost.

Money market is the centre for dealing mainly in short — term money assets. It meets the short-term requirements of borrowers and provides liquidity or cash to lenders.… Read the rest

Abey Francis

Definition of Certificate of Deposit (CD)

Certificate of deposits(CD) are short term deposit instruments issued by banks and financial institutions to raise large sums of money.

Features of Certificate Of Deposit

  • Document of title to time deposit.
  • Unsecured negotiable promotes.
  • Freely transferable by endorsement and delivery.
  • Issued at discount to face value.
  • Repayable on a fixed date without grace days.
  • Subject to stamp duty like the usince   promissory notes.

The banks in USA in 1960s introduced CDs which are freely negotiable and marketable any time before maturity. The CDs were issued by big banks in the USA of $1 million at face value bearing fixed interest with a maturity generally ranging from 1 to 6 months.… Read the rest

Abey Francis

Commercial Paper – Definition, Features and Advantages

What is a Commercial Paper?

A commercial paper is an unsecured promissory note issued with a fixed maturity by a company approved by RBI, negotiable by endorsement and delivery, issued in bearer form and issued at such discount on the face value as may be determent by the issuing company.

Features of Commercial Paper
  1. Commercial paper is a short-term money market instrument comprising usince promissory note with a fixed maturity.
  2. It is a certificate evidencing an unsecured corporate debt of short term maturity.
  3. Commercial paper is issued at a discount to face value basis but it can be issued in interest bearing form.
… Read the rest
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Treasury Bill markets

Just like commercial bills which represent commercial debt, treasury bills represent short-term borrowings of the Government. Treasury bill market refers to the market where treasury bills are brought and sold. Treasury bills are very popular and enjoy higher degree o9f liquidity since they are issued by the government.

Meaning and Features of Treasury Bills:

A treasury bills nothing but promissory note issued by the Government under discount for a specified period stated therein. The Government promises to pay the specified amount mentioned therein to the beater of the instrument on the due date. The period does not exceed a period of one year.… Read the rest

Abey Francis

Commercial Bills Market or Discount Market

A commercial bill is one which arises out of a genuine trade transaction, i.e. credit transaction. As soon as goods are sold on credit, the seller draws a bill on the buyer for the amount due. The buyer accepts it immediately agreeing to pay amount mentioned therein after a certain specified date. Thus, a bill of exchange contains a written order from the creditor to the debtor, to pay a certain sum, to a certain person, after a creation period. A bill of exchange is a ‘self-liquidating’ paper and negotiable/; it is drawn always for a short period ranging between 3 months and 6 months.… Read the rest

Abey Francis

All About Call Money Market in India

The call money market refers to the market for extremely short period loans; say one day to fourteen days. These loans are repayable on demand at the option of either the lender or the borrower. The money that is lent for one day in this market is known as “Call Money”, and if it exceeds one day (but less than 15 days) it is referred to as “Notice Money”. Term Money refers to Money lent for 15 days or more in the Inter Bank Market.  These loans are given to brokers and dealers in stock exchange. Similarly, banks with ‘surplus’ lend to other banks with ‘deficit funds’ in the call money market.… Read the rest

Abey Francis