Q.5. Attempt the following (Any TWO)
What Are Money
Market Instruments?
As the name suggests, Money
Market Instruments are simply the instruments or tools which can help one
operate in the money market. These instruments serve a dual purpose of not only
allowing borrowers meet their short-term requirements but also provide easy
liquidity to lenders.
Some of the common money market
instruments include Banker’s Acceptance, Treasury Bills, Repurchase Agreements,
Certificate of Deposits and Commercial Papers.
Money market instruments allow
governments, financial organizations and businesses to finance their short-term
cash requirements. Some of the notable characteristics of money market
instruments are as follows.
Liquidity – Money market instruments are highly liquid
because they are fixed-income securities which carry short maturity periods of
a year or less.
Safety – Issuers of money market instruments have strong
credit ratings, which automatically means that the money instruments issued by
them will also be safe.
Discount Pricing – Another important characteristic feature of
money market instruments is that they are issued at a discount on their face
value.
