MGT 103 Money Markets Quiz

Study Notes

The money market is a network involving corporations, financial institutions, investors, and governments, facilitating short-term capital transactions.
It primarily deals with instruments that have maturities of one year or less.

Commercial Paper
- Short-term debt obligation from private firms or government-sponsored corporations.
- Issued by companies with strong credit ratings to assure investors of financial stability.
Bankers’ Acceptances
- Promissory notes issued by non-financial firms to banks for short-term loans.
- Historically a primary method for firms to access short-term funding.
Treasury Bills (T-bills)
- Government-issued securities maturing in one year or less.
- Considered the safest investment option in the currency they are issued.
Government Agency Notes
- Issued by national government agencies and government-sponsored corporations.
- Commonly utilized by development banks, educational lending agencies, and agricultural finance institutions.
Local Government Notes
- Issued by provincial or local governments and affiliated agencies.
- Their issuance capability differs significantly across various countries.
Interbank Loans
- Short-term loans between banks that lack a direct affiliation.
- Often occur across international borders, aiding banks in lending to their customers.
Time Deposits (Certificates of Deposits - CDs)
- Interest-bearing deposits in banks with a set maturity date.
- Withdrawals before the maturity date incur penalties.
Repurchase Agreements (Repos)
- Financial agreements where securities are sold and later repurchased, enhancing market liquidity.
- Play a vital role in maintaining a constant supply of money-market instruments.