FIN 721 Mid-term Review.docx - List and explain 5 money market instruments Treasury Bills Short-term government securities issued at a discount from

FIN 721 Mid-term Review.docx - List and explain 5 money...

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List and explain 5 money market instruments. Treasury Bills : Short-term government securities issued at a discount from face value and returning the fact amount at maturity. Investors buy bills at discount from the stated maturity. T-bills are issued with initial maturities of 4, 13, 26, or 52 weeks. Certificate Deposit (CD ): A bank time deposit. Time deposits may not be withdrawn on demand. The bank pays interest and principal to the depositor only at the end of the term of the CD. Banks issue Certificates of Deposits for durations ranging from 3 months, 6 months and 12 months. Commercial Paper (CP) : Short-term unsecured debt issued by large corporations. CP maturities range up to 270 days, but most often, they are issued with maturities of less than one or two months in denominations of multiples of $100,000. Commercial Papers promise higher returns as compared to treasury bills. Bankers’ Acceptances : An order by a bank by a customer to pay a sum of money at a future date. Acceptances sell at a discount from the face value of the payment order, just as T-bills

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