Fundamental of Finance Assignment, Money Market

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  • Topic: Bond, Deposit account, Cheque
  • Pages : 12 (3846 words )
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  • Published : March 10, 2013
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TABLEOF CONTENT
Plagiarism Statement Declaration Form
Marking scheme
1. Introduction
2. Body-
i. Call deposit
ii. Term deposit
iii. Bills of exchange
iv. Floating rate note
v. Treasury bills
vi. Certificate of Deposit (CD)
vii. Commercial paper
3.Recommendation/opinion
4. Conclusion
5. Referencing

3.

MARKING SCHEME (ASSESSMENT CRITERIA):
Criteria| Maximum Marks| Marks Allocated| Remarks|
1. Introduction| 10| | |
2. Body - facts| 24| | |
3. Recommendations/opinion if any| 14| | |
4. Conclusion| 8| | |
5. Referencing| 4| | |

Introduction
Definition
Money market is the Centre of dealings, mainly short term character, in money assets. It meets the short term requirements of borrowers and provides liquidity or cash to the lenders. It is the place where short term surplus investible funds at the disposal of financial and other institutions and individual are bid by borrowers, again comprising Institutions, individuals and also the government itself. Money market refers to the market for short term assets that are close substitutes of money, usually with maturities of less than a year. A well-functioning money market provides a relatively safe and steady income-yielding avenue. It also allows the investor institution to optimize the yield on temporary surplus fund. What is it?

The money market is a subsection of the fixed income market. We generally think of the term fixed income as being synonymous to bonds. In reality, a bond is just one type of fixed income security. The difference between the money market and the bond market is that the money market specializes in very short-term debt securities (debt that matures in less than one year). Money markets investments are also called cash investments because of their short maturities. Money market securities are essentially IOUs issued by governments, financial institutions and large corporations. These instruments are very liquid and considered extraordinarily safe. Because they are extremely conservative, money market securities offer significantly lower returns than most others securities. One of the main differences between the money market and the stock market is that most money market securities trade in very high denominations. This limits access for the individual investor. Furthermore, the money market is a dealer market, which means that firm buys and sells securities in their own accounts, at their own risk. Compare this to the stock market where a broker receives commission to act as an agent, while the investors take the risk of holding the stock. Another characteristic of a dealer market is the lack of a central trading floor or exchange. Deals are transacted over the phone or through electronic systems. The easiest way for us to gain access to the money market is with a money market mutual fund, or sometimes through a money market bank account. These accounts and fund pool together the assets of thousands of investors in order to buy the money market securities on their behalf. However some money market instruments like Treasury bills maybe purchase directly. Falling that, they can be acquired through other large financial institutions with direct access to these markets. There are several different instruments in money market, offering different returns and different risks. In the following sections, we will take a look at the major money market instruments.

Body
Money Market Instruments
From what we have learn in AAMS2013 FUNDAMENTALS OF FINANCE, the money market have a few of instruments, there are some that we are going to discuss in this assignment. The instruments includes:- * Call deposit

* Term deposit
* Bills of exchange
* Floating rate note
* Treasury bills
* Certificate of Deposit (CD)
* Commercial paper

Call Deposit
Definition of call deposit
The term Call Deposit, in deposit terminology, is mention about a...
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