8 Questions
What is one disadvantage of the money market compared to equity markets?
Returns are lower
What characteristic of money market limits retail participation?
High threshold limits for transacting
What is a disadvantage of the money market in terms of tax advantage?
Lower tax advantage due to 3-year qualifying period for LTCG
What risk factor is associated with commercial papers in the money market?
Unsecured
What type of corporates enjoy the benefits of raising funds in the money market?
Large corporates with high ratings
What are some risks that the money market suffers from?
Inflation risk, interest rate risk, market risk, credit risk
What is the role of a central bank in a developed money market?
Controls, regulates, and provides liquidity
What is the importance of an organised banking system in the money market?
Pivot around which the money market revolves
Test your knowledge on the disadvantages of the money market, including low returns compared to equity markets, dominance by the government sector, limited retail participation, tax disadvantages, lack of deposit insurance, unsecured commercial papers, short maturity periods, and benefits only for large corporates.
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