Money market refers to the market for trading of short term securities and funds. Securities traded in the money market have a very short maturity period ranging from one day to one year. Such assets act as a close substitute for cash or money. Due to their short maturity period they are also known as 'Near Money instruments'. Money market instruments act as an important source of finance for working capital requirements. They enjoy a high degree of liquidity. DFHI discounts money market securities and offers a ready market for them. In addition, securities traded in the money market are safe and secure as the transactions are made in those instruments that are issued by financial institutions and those companies that are financially strong. Common instruments traded in the money market are treasury bills, commercial paper, call money, certificate of deposit, etc.
FAQs
”Money Market is essentially a Market for short term funds”. Discuss.? ›
Money market refers to the market for trading of short term securities and funds. Securities traded in the money market have a very short maturity period ranging from one day to one year. Such assets act as a close substitute for cash or money.
Is the money market a market for short term funds? ›The money market is part of the fixed-income market that specializes in short-term debt securities that mature in less than one year. Most money market investments mature in three months or less. These are considered to be cash investments because of their quick maturity dates.
What is the money market essentially market for? ›Money market refers to the market for trading of short term securities and funds.
Is the money market the market for the long term funds? ›It is used by participants as a means for borrowing and lending in the short term, with maturities that usually range from overnight to just under a year. ''Money Market is essentially a Market for short term funds''.
Is the money market a market for short term funds True False? ›Answer and Explanation: The given statement is true. The money market is a market that covers the short-term financial instrument transactions. Short-term financial instruments are instruments with a maturity of less than one year.
What is the difference between short-term and long term money market? ›Short-term investments offer quick returns and liquidity, suitable for immediate needs. Long-term investments provide higher growth potential over time, ideal for building wealth and retirement planning.
What is a short-term fund called? ›Short-term Mutual Funds, also known as low duration funds typically have a portfolio duration ranging from 6 months to 3 years. These funds invest in money market instruments, certificates of deposit and short-term government and corporate bonds.
What is the money market in a short note? ›The money market refers to trading in very short-term debt investments. At the wholesale level, it involves large-volume trades between institutions and traders. At the retail level, it includes money market mutual funds bought by individual investors and money market accounts opened by bank customers.
What is an example of a money market fund? ›Types of money market funds
Investments can include short-term U.S. Treasury securities, federal agency notes, Eurodollar deposits, repurchase agreements, certificates of deposit, corporate commercial paper, and obligations of states, cities, or other types of municipal agencies—depending on the focus of the fund.
Money Market. The part of the global financial market that deals with financial instruments that are easily converted to cash (highly liquid) and have very short maturities, usually one year or less.
What are two disadvantages of a money market fund? ›
Key takeaways
Disadvantages of money market accounts may include hefty minimum balance requirements and monthly fees — and you might be able to find better yields with other deposit accounts.
Investment Horizon: Money market investments have a short-term focus, typically from overnight to one year, whereas capital market investments have a longer-term horizon, spanning several years or more.
What is the downside of a money market account? ›Many accounts have monthly fees
Another drawback to remember is that while they have high yields, money market accounts can also come with cumbersome fees. Many banks and credit unions will impose monthly fees just for the upkeep of your account.
However, this only happens very rarely, but because money market funds are not FDIC-insured, meaning that money market funds can lose money.
Does money market funds have high risk? ›Low Risk and Short Duration
As stated above, money market funds are often considered less risky than their stock and bond counterparts. That's because these types of funds typically invest in low-risk vehicles such as certificates of deposit (CDs), Treasury bills (T-Bills), and short-term commercial paper.
Money market accounts are ideal for storing funds for shorter-term savings goals, such as saving up for a new car or a vacation. You'll not only earn interest on your savings, but you'll also be able to conveniently make payments directly from your account.
Why do people invest in money markets? ›Money market funds invest in highly liquid securities like cash, cash equivalents, and high-rated debt-based securities. Because they only invest in highly rated securities, money market funds offer a high degree of safety. Money market funds also offer investors higher yields than traditional savings accounts.