5 Questions
What is the definition of money market?
The buying and selling of debt instruments maturing in less than two years
Which of the following is NOT a money market security?
Corporate bonds
What are banker's acceptances?
Promissory notes issued by non-financial firms to a bank in return for a loan
What is the definition of yield to maturity?
The bonds' internal rate of return
What is the difference between preferred shares and participating preference shares?
Preferred shares have a claim against income and assets before ordinary shares but after debt, while participating preference shares entitle its holders to share in profits above and beyond the declared dividend
Study Notes
Money Market
- The money market is a market for short-term debt securities with a maturity period of less than one year, providing a means for borrowers to access short-term funding and investors to earn returns on their short-term surplus funds.
Types of Money Market Securities
- Examples of money market securities include commercial paper, treasury bills, certificates of deposit, and banker's acceptances.
- NOT a money market security: Common Stock (as it is a long-term security)
Banker's Acceptances
- A banker's acceptance is a negotiable instrument where a bank guarantees payment to a seller of goods or services on behalf of a buyer, making it a low-risk investment.
Yield to Maturity
- Yield to maturity is the total return on an investment, including interest and any capital gains or losses, calculated from the time of purchase until the bond's maturity date.
Types of Preferred Shares
- Preferred shares are a type of equity that has a higher claim on assets and earnings than common shares, and typically offers a fixed dividend rate.
- Participating preferred shares are a type of preferred shares that, in addition to the fixed dividend, also participate in any additional dividends paid to common shareholders, making them more valuable.
Test your knowledge on the Money Market and its various financial instruments such as Commercial Papers and Banker's Acceptances with this quiz! Learn about the buying and selling of debt instruments with a maturity of one year or less and how these securities are used to warehouse funds until needed. Explore the low risk and high liquidity nature of money market investments and their returns in this informative quiz.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
