Money Market and Primary Market Instruments

Money Market Instruments

• Inter-bank participation certificates (IBPCs) are short-term instruments used by banks to raise or deploy surplus funds.
• Bills of exchange are written orders binding one party to pay a fixed sum of money to another party on demand or at a future date.

Primary Market

• The primary market, also known as the new issue market, is where companies issue new securities to raise capital.
• Public issue is a type of primary market issuance where securities are offered to the general public.
• Rights issue is a primary market issuance where existing shareholders are offered additional securities.
• Private placement is a type of primary market issuance where securities are sold to pre-selected investors and institutions.

Secondary Market

• The secondary market is where investors buy and sell existing securities.
• Trades take place between investors and traders, rather than with the companies that issued the securities.
• National exchanges, such as the New York Stock Exchange (NYSE) and the NASDAQ, facilitate secondary market transactions.

Investment Instruments

Fixed-Income Instruments

• Fixed-income instruments guarantee regular, fixed income through investments.
• Examples of fixed-income instruments include debentures and bonds.

Variable Income Instruments

• Variable income instruments do not guarantee fixed income, and returns vary based on market fluctuations.
• Examples of variable income instruments include equity and derivatives.
• Investments in variable income instruments carry high risk, but also offer potential for high rewards.

Hybrid Instruments

• Some instruments, such as convertible debentures, offer both fixed and variable returns on investments.
• Convertible debentures can be converted into equity shares after a set period.

This quiz covers various financial instruments, including inter-bank participation certificates, bills of exchange, and primary market securities. Learn about their features and uses.