Finance Market And Instruments Case Study With Questions And Answers

Finance Market And Instruments Case Study With Questions And Answers where many different financial instruments are traded. The trading instruments in these markets fluctuate in nature and are customized to best suit the needs of different people. In detail, people with surplus money offer their funds to the people who require it for investment in various projects. They are the tools that let people buy and sell other commodities. Trading can be done either internationally or domestically following the market pricing. To know more about such a topic, you need to get through the finance market and instruments case study with questions and answers in a learned way.

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Purpose of financial markets:

  • The ultimate goal of all financial markets is to provide some sort of, and that is accomplished with the help of these different financial markets, and here financial transaction takes place in the stock exchange.
  • Financial markets have their advantages and disadvantages inherent in the system. So, it is good to be well informed about the different financial markets and instruments case study with questions and answers before you make use of it. Even though financial markets are considered safe, they have felt negative returns hardly.

Types of financial markets and instruments:

Capital markets:

This sort of financial market deals with the trade of certain kinds of stocks and bonds. This kind of market relates both to newly issued shares and handles trades of already existing bonds and stocks. It is referred to as the bond/stock market, and the bond market manages funds regarding the issuance of different types of relationships and stock market overseas stock issues.

Money markets:
  • These are the main components of the financial markets, and it concerns itself with short-term lending and borrowing ways of securities with a specific maturation date.
  • The instruments traded in money markets are commercial papers, treasury bills, certificates of deposit and other financial instruments. This sort of market facilitates capital financing and short-term debt.
Treasury bills:

This is one of the most common market instruments used these days. This allows investors to place their short-range excess money with lessened market risk. The main advantage of such finance instruments is that the RBI repeatedly auctions them and is often issued with a concession.

Commercial papers:
  • This type is considered an unsecured market instrument, and it is a short-term loan that is used for funding accounts in their inventories and frequently sold at a discount and is significantly impacted by market interest rates.
  • The maturities associated with this commercial paper are generally at an extent of 9 months. Mostly, these sorts of investments are sold within one or two days.
  • This investment is considered safe, and the development of the investment can be found and predicted in the least period.
  • Corporations with higher ratings of credit alone usually release these.
Certificates of deposit:

This kind of financial marketing instrument is negotiable and issued by banks, and usually, they don’t have a maturity that is not less than a week and goes up to one year. Nearly all financial institutions allow these instruments to be issued for some time between one year and a maximum of three years. Usually, they are like bank deposits and are known to have a huge return when compared to standard bank terms. Generally, these certificates are issued by all scheduled banks and provided to individual people, organizations, trusts, and other associations. During the issuance, they often come with a discount rate and can be decided by the issuer or investor on their own.

Buyback agreements:
  • It is one of the short-term money market instruments and is released by government securities.
  • Also, the process is very quick all the time and is usually sold within a single day, and the vendor agrees to purchase it again in the future, whereas, for the buyer, it is a reverse repurchase agreement.
  • This works towards giving the benefit of the investor as it does not have any specific maturity time and hang around.
  • Although the asset is sold at the earlier stage, the commitment to purchase it makes it an impermanent (short-term) sale even though it is officially considered a permanent sale.
Banker’s acceptance:

To summarize, the finance market is enormous, and you need to go nook and corner to have a good standing in such a field. It is right for you to run through the finance market and instruments case study with questions and answers to apprehend the basic concepts in the finance field and use them up for the future.

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