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Questions and Answers
What is the main purpose of inter-bank participation certificates (IBPC)?
What is a bill of exchange?
What is the primary market also known as?
What type of instrument is a convertible debenture?
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What is a private placement?
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Where do investors buy and sell securities?
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Study Notes
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.
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Description
This quiz covers various financial instruments, including inter-bank participation certificates, bills of exchange, and primary market securities. Learn about their features and uses.
