Chapter 5 - Money Markets

2 commercialpaper shorttermloanupto270daysmaturity

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Unformatted text preview: thus T­bills offer risk­ free rate of return 1. Certificates of Deposit (CD) A time deposit with a bank ► Highly marketable if holders need cash ► Bank pays interest and principal to depositor at maturity ► Low default risk and low return 2. 2. ► Commercial paper Short term loan , up to 270 days maturity ► Issue by large and well­known corporations ► Higher risk compares to others, thus higher return ► Offer to institutional investors 3. ► Bankers’ Acceptance ► An order to a bank by a customer to pay a sum of money at a future date ► Low risk and widely use in foreign trade ► Active secondary market 4. 4. Eurodollars ► Dollar­denominated deposits at foreign banks or foreign branches of domestic banks ► Most eurodollars are time deposits with ma...
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