Money Market is an essential component of the financial market where a wide range of borrowers and investors deal in short term monetary assets such as certificate of deposit, commercial paper, T-bills; G-Sec bonds etc. with high liquidity and short term maturities to meet short term funds requirement. Copy the link given below and paste it in new browser window to get more information on Money Market:- http://www.transtutors.com/homework-help/finance/money-market.aspx

2. DEFINATION
The financial system of an economy is divided into capital
market and the money market. MONEY MARKET is an
environment where investors and buyers interact to
deal in short term negotiable instruments of high
liquidity and short term maturity of 1 day up to 365 days
for meeting short term fund requirement. Participants of
this market are government, financing companies,
corporate institutions, banking institutions etc.

3. FEATURES
Highly liquid instruments
Over the counter transactions
Perfect mobility of funds
Unregulated and informal market
 certain amount of risk is present
Integrated interest rate structure
Maturity period of 1 day up to 365 days or 1 year

4. INTRUMENTS
Treasury bills
Certificate of deposit
Commercial paper
Re-purchase agreements
Banker’s Acceptance
Mutual funds
STIPs

5. FUNCTIONS
• Maintain monetary equilibrium
• Maintain liquidity and profitability
• Capital formation
• Effective implementation of monetary policies
• Promotes savings and investments
• Make commercial banks self sufficient
• Mobilization of funds for trade and industry

7. BASIS MONEY MARKET CAPITAL MARKET
NATURE INFORMAL FORMAL
TIME HORIZON SHORT TERM
1 DAY – 365 DAYS
LONG TERM
INSTRUMENTS T-BILLS, CDS, STIPs EQUITY, DEBT, BONDS,
STOCKS
RISK LOW HIGH
LIQUIDITY HIGH LOW
ROI LESS HIGH
TRADING PLACE OVER THE COUNTER EXCHANGES

8. MONEY MARKET FUNDS
Money market funds are a sort of mutual funds having
different varieties of instruments under it
The objective of money market fund is to maintain the net
asset value of per share as $1. Regulated in the United States
under the Investment Company Act of 1940
Characteristics:
Low risk
Low volatility
Securities are highly liquid and of high quality
Low return investment
Safe place to invest
 not guaranteed under insurance

9. MONEY MARKET ACCOUNT
Type of a savings account
Authorized on 14 December 1982
High interest rate and high yields
Minimum balance between $1000-$25000
Not counted as regular transaction account
Covered under insurance

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