Excess liquidity they are certificates issued by

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excess liquidity. They are certificates issued by commercial banks for large cash deposits. Investopedia describes CDs as offer a slightly higher yield than T-Bills because of the slightly higher default risk for a bank but, overall, the likelihood that a large bank will go broke is pretty slim. Of course, the amount of interest you earn depends on a number of other factors such as the current interest rate environment, how much money you invest, the length of time and the particular bank you choose. While nearly every bank offers CDs, the rates are rarely competitive, so it is important to shop around. 3. Commercial Paper Eagletraders.com defines commercial paper as, a short-term unsecured promissory note issued by corporations and foreign governments. It is a low-cost alternative to bank loans, for many large, credits worthy issuers. Issuers are able to efficiently raise large amounts of funds quickly and without expensive Securities and Exchange Commission (SEC) registration. 4. Bankers Acceptance Bankers acceptance or letters of credit is a time draft which is drawn on and accepted by banks. Eagletraders states that before acceptance, the draft is merely an order by the drawer to the bank to pay a specified sum of money on a specified date to a named person or to the bearer of the draft; it is not an obligation of the bank. Upon acceptance, which occurs when an authorized bank employee stamps the draft "accepted" and signs it, the draft becomes a primary and unconditional liability of the bank. If the bank is well known and enjoys a good reputation, the accepted draft may be readily sold in an active market. 5. Bank Guarantees It is a written undertaken in which the bank agrees to make specific payments on ones behalf in case the person fails fulfill certain terms in the contract. 4.0 Conclusion In the money market, trades are short term. Participants’ borrow or lend for short periods and it provides short-term liquid funding for the financial system all over the world.
91 Securities sold on the money market mature range is between a day up to a year. The money market allows firms to invest in short-term securities when they have temporary cash surplus. 5.0 Summary In this unit, various money market instruments where identified. Five of them where adequately explained. It is expected that you are now very familiar with these instruments. 6.0 Tutor-Marked Assignment 1. What are money market instruments? 2. Differentiate between bankers acceptance and bank guarantees 7.0 References/Further Reading M.J, E. (n.d.). Economic News Reporting. College of Management Science Department of Mass Communication .
92 Unit 5 Problems Facing the Capital Market in Nigeria Contents 1.0 Introduction 2.0 Objectives 3.0 Main Content 3.1 Problems Facing the Capital Market in Nigeria 4.0 Conclusion 5.0 Summary 6.0 Tutor-Marked Assignment 7.0 References/Further Reading 1.0 Introduction The Nigerian Capital Market has benefitted from structural reforms to the economy. These reforms which started in 1999, has led to additional investments into the capital market.

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