1. Money Market: Introduction
  2. Money Market: What Is It?
  3. Money Market: Treasury Bills (T-Bills)
  4. Money Market: Certificate Of Deposit (CD)
  5. Money Market: Commercial Paper
  6. Money Market: Banker's Acceptance
  7. Money Market: Eurodollars
  8. Money Market: Repos
  9. Money Market: Conclusion

 

Money market transactions involve short-term instruments with a maturity of one year or less. Money market securities are very liquid, and are considered very safe. As a result, they offer a lower return than other securities.

 

The easiest way for individuals to gain access to the money market is through a money market mutual fund which are sold through a stable NAV, usually $1 per share.

 

·         T-bills are short-term government securities that mature in one year or less from their issue date.

·         T-bills are considered to be one of the safest investments, and are often referred to as “riskless.”

 

·         A certificate of deposit (CD) is a time deposit with a bank. CDs are safe, but the returns aren't great, and your money is tied up for the length of the CD.

 

·         Commercial paper is an unsecured, short-term loan issued by a corporation. Returns are higher than T-bills because of the higher default risk.

 

·         Banker's acceptances are negotiable time drafts for financing transactions in goods. BAs are used frequently in international trade and are generally only available to individuals through money market funds.

 

·         Eurodollars are U.S. dollar-denominated deposit at banks outside of the United States.    The average Eurodollar deposit is very large. The only way for individuals to invest in this market is indirectly through a money market fund.

 

·         Repurchase agreements (repos) are a form of overnight borrowing backed by government securities.

 


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