Money and Capital Market

In: Business and Management

Submitted By tookho1
Words 779
Pages 4
Lecture 2
Direct & Intermediated Finance

***** Flow of Funds
Readings: Viney: Chapter 1

Important Notice: All students should officially enrol in a tutorial class using Allocate+. If you have not enrolled for a tutorial class yet, please do so as soon as possible.

Perdisco e-workbook
TUTORIALS Your tutorial classes will be starting in this week. Please make sure to meet your tutor and take down his details (his name and consultation hours) in the first meeting.

An online study resource (eworkbook) is available from a commercial firm for this unit to help you learn further. Please note that this is optional

It’s designed to give you the chance to practice, revise and focus on each topic until you completely understand it

E-workbook feedback provides step-by-step solutions to help you find out where you went wrong

Contains interesting (and often humorous) practice questions to help you learn difficult concepts

You also receive an academic discussion explaining how to get the answer correct next time

1

I really appreciated the prompt feedback. It’s like having a tutor there to explain things to you, whereas you can’t always make use of consultation hours.
Angela, University of Sydney

How to register
Go to www.perdisco.com/students Click ‘Create a new account’ Follow the instructions on screen

1.

The e-workbook has brought up my grades from a Pass to a Distinction… with this e-workbook I have a greater ability to excel in my studies.
Adam, ACU

2.

What do other students think of their e-workbook?

3.

From Last Week Lecture (we discussed):
What is a financial system and role of money? What are financial instruments (assets)? What is a financial market? Primary and secondary markets Wholesale and retail markets Money and capital markets Categories of Financial Institutions

Financial Model Flow of goods and…...

Similar Documents

Money Market

...Financial Markets that facilitate the flow of funds from the suppliers of funds to firms or governments who need funds. Financial institutions serve as intermediaries by channeling the savings of individuals to firms that need funds. * Investors commonly finance the investments made by firms by purchasing debt securities or equity securities issued by those firms. In this assignment, functioning of Financial Markets would be explained with details of Capital and Money Markets’ Instruments.. Financial Markets; Types and Functions A financial market is a place for buying and selling of financial securities such as stocks and bonds. The financial markets can be divided into different subtypes; * Capital Markets  * Stock Markets, that deal in issuance and subsequent trading of shares or common stock. * Bond Markets, that deal in issuance and subsequent trading of bonds. * Commodity Markets, that facilitate the trading of commodities. * Money Markets, that provide short term debt financing and investment. * Derivatives Markets, that provide instruments for the management of financial risk. * Futures Markets, that provide standardized forward contracts for trading products at some future date. * Insurance Markets, that facilitate the redistribution of various risks. * Foreign Exchange Markets, that facilitate the trading of foreign exchange. The capital and money markets are also classified into primary......

Words: 1575 - Pages: 7

Capital Market

...A PROJECT ON CAPITAL MARKET GUIDE CERTIFICATE It is hereby certified that the project report on “CAPITAL MARKET”, being submitted by Shelly jumba student of the degree of Master of Business Administration (3rd Sem) of CT Institute of Management and Information Technology, Jalandhar which affiliated to Punjab Technical University, Jalandhar is an original work carried out successfully under my guidance and supervision and that no part of this project has been submitted for any other degree/ diploma. The sincerely efforts put in during the course of investigation is hereby acknowledged. Project guide Miss Shivani jagneja Lect. CTIM& IT DECLARATION This project entitled Empirical Study on “CAPITAL MARKET” is submitted in partial fulfilment of the requirement for the award of degree of master of business administration of Punjab technical university, Jalandhar. .This research work has been done only for MBA only and none of this research work has been submitted for any other degree. The assistance and help during the execution of the project has been fully acknowledged. PREFACE The successful completion of this project was a unique experience for us because by visiting many place and interacting various person, I achieved a better knowledge about this project. The experience which I gained by doing this project was essential at this turning point of my carrier this project is being submitted which content detailed analysis of the research under taken by......

Words: 16886 - Pages: 68

Capital Market

...Capital market is one of the most important segments of the Indian financial system. It is the market available to the companies for meeting their requirements of the long-term funds. It refers to all the facilities and the institutional arrangements for borrowing and lending funds. In other words, it is concerned with the raising of money capital for purposes of making long-term investments. The market consists of a number of individuals and institutions (including the Government) that canalise the supply and demand for long -term capital and claims on it. The demand for long term capital comes predominantly from private sector manufacturing industries, agriculture sector, trade and the Government agencies. While, the supply of funds for the capital market comes largely from individual and corporate savings, banks, insurance companies, specialised financing agencies and the surplus of Governments. The Indian capital market is broadly divided into the gilt-edged market and the industrial securities market. ▪ The gilt-edged market refers to the market for Government and semi-government securities, backed by the Reserve Bank of India (RBI). Government securities are tradeable debt instruments issued by the Government for meeting its financial requirements. The term gilt-edged means 'of the best quality'. This is because the Government securities do not suffer from risk of default and are highly liquid (as they can be easily sold in the market at their current price). The......

Words: 1847 - Pages: 8

Money Market

...MONEY MARKET As money became a commodity, the money market became a component of the financial markets for assets involved in short-term borrowing, lending, buying and selling with original maturities of one year or less. Trading in the money markets is done over the counter, is wholesale. Various instruments exist, such as Treasury bills, commercial paper, bankers' acceptances, deposits, certificates of deposit, bills of exchange, repurchase agreements, federal funds, and short-lived mortgage-, and asset-backed securities. It provides liquidity funding for the global financial system. Money markets and capital markets are parts of financial markets. The instruments bear differing maturities, currencies, credit risks, and structure. Therefore they may be used to distribute the exposure. The money market developed because parties had surplus funds, while others needed cash. Today it comprises cash instruments as well. Functions of the money market * transfer of large sums of money * transfer from parties with surplus funds to parties with a deficit * allow governments to raise funds * help to implement monetary policy * determine short-term interest rates Money market organizations * Trading companies often purchase banker’s acceptance to be tendered for payment to overseas suppliers. * Retail and institutional money market funds * Banks * Central banks * Cash management programs * Merchant Banks Common money market......

Words: 1247 - Pages: 5

Money Markets

...company, which is typically money to be earned from future operations. In some cases, the company's physical assets may be used as collateral for bonds. Corporate bonds are considered higher risk than government bonds. As a result, interest rates are almost always higher, even for top-flight credit quality companies.   Investopedia explains Corporate Bond Corporate bonds are issued in blocks of $1,000 in par value, and almost all have a standard coupon payment structure. Corporate bonds may also have call provisions to allow for early prepayment if prevailing rates change. Corporate bonds, i.e. debt financing, are a major source of capital for many businesses along with equity and bank loans/lines of credit. Generally speaking, a company needs to have some consistent earnings potential to be able to offer debt securities to the public at a favorable coupon rate. The higher a company's perceived credit quality, the easier it becomes to issue debt at low rates and issue higher amounts of debt.   Most corporate bonds are taxable with terms of more than one year. Corporate debt that matures in less than one year is typically called "commercial paper".   Capital Markets What Does Capital Markets Mean? A market in which individuals and institutions trade financial securities. Organizations/institutions in the public and private sectors also often sell securities on the capital markets in order to raise funds. Thus, this type of market is composed of both......

Words: 4146 - Pages: 17

Money Market

...MERITS OF MERGERS & ACQUISITION IN THE BANKING INDUSTRY IN NIGERIA Improvement of Financial Capacity: The consolidation in the banking industry will bring about improved financial capacities of the banks. Thus, the banks would have larger capitals at their disposal to finance mega projects both in the long and in the short terms. Management of the Foreign Reserves by the mega banks would enable the bank finance high capital intensive projects: manufacturing, oil and gas, agriculture etc. Security of Depositors’ Funds: The availability of this capital also means that the banks are now stronger and customers’ deposits would become safe. The issue of distress in the banking industry would become a thing of the past if the banks are able to effectively manage the large pool of funds. Improvement of Technical Capacity: The coming together of different banks will bring about improved technical capacity. The merging/acquired banks will benefit from the technical competence of one another. Improvement in Managerial Capacity: Other things being equal, the consolidation would bring about expansion and this comes with the multiplier effects such as employment generation in other sectors of the economy since the banks now have more money to lend to the manufacturing and other sectors of the economy. B. DEMERITS OF MERGERS & ACQUISITION IN THE BANKING INDUSTRY IN NIGERIA Integration Challenges: The just concluded banking industry consolidation is likely to pose additional......

Words: 1412 - Pages: 6

Money Market

...Money Market Report Introduction SIBOR Forecast Strategies Role as Price Maker For Consumers For Bank to Bank (Corporate) Products and Services Operational Costs Source of Funds Risks/Obstacles Introduction Money market is like a place for large institutions and government to manage their short-term cash needs. However, individual investors have access to the market through a variety of different securities. Money market securities are essentially IOUs issued by governments, financial institutions and large corporations. These instruments are very liquid and considered extraordinarily safe. Because they are extremely conservative, money market securities offer significantly lower returns than most other securities. Eg. Treasury Bills. SIBOR SIBOR stands for Singapore Interbank Offered Rate and is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the Singapore money market (interbank market). The chart below shows 3 month SIBOR for the past 3 years. [pic] (6 Month and 12 month SIBOR chart can be found in appendix page) 3 month SIBOR is a common benchmark rate used by the banks to adjust their deposit rates. By monitoring it, you can get an indication of where banks are headed next with their fixed deposit and savings account rates. As shown, overall interest rate (SIBOR) has been declining since the year 2006. When SIBOR goes down,......

Words: 1557 - Pages: 7

Money Market

...* A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. The money market is a mechanism that deals with the lending and borrowing of short term funds (less than one year).As per RBI definitions “ A market for short terms financial assets that are close substitute for money, facilitates the exchange of money in primary and secondary market”. * 2.  It doesn’t actually deal in cash or money but deals with substitute of cash like trade bills, promissory notes & It includes all individual, institution and intermediaries.govt papers which can converted into cash without any loss at low transaction cost. * 3.  In Money Market transaction can not take place formal like stock exchange, only through oral communication, relevant document and written communication transaction can be done. It deals with financial assets having a maturity period less than one year only. It is a market purely for short-terms funds or financial assets called near money. * 4.  It is not a single homogeneous market, it comprises of several submarket like call money market, acceptance Transaction have to be conducted without the help of brokers. & The component of Money Market are the commercial banks, acceptance housesbill market. & NBFC (Non-banking financial companies). * To provide a reasonable access to users of short-term funds to meet their requirement quickly, adequately at reasonable cost. To enable the......

Words: 459 - Pages: 2

Money Market

...Money market in India is the money market for short-term funds with maturity ranging from overnight to one year in India including financial instruments that are deemed to be close substitutes of money Instruments in Money market Commercial paper An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories and meeting short-term liabilities. Maturities on commercial paper rarely range any longer than 270 days. The debt is usually issued at a discount, reflecting prevailing market interest rates. Usually done by companies having high credit worthiness and rating Call money/Notice money/term money The money market primarily facilitates lending and borrowing of funds between banks and entities like Primary Dealers (PDs). Banks and PDs borrow and lend overnight or for the short period to meet their short term mismatches in fund positions. This borrowing and lending is on unsecured basis. ‘Call Money’ is the borrowing or lending of funds for 1day. Where money is borrowed or lend for period between 2 days and 14 days it is known as ‘Notice Money’. And ‘Term Money’ refers to borrowing/lending of funds for period exceeding 14 days. Tbills Treasury bills are circulated by the primary as well as the secondary markets. The maturity periods for treasury bills are respectively 91,182, 364 days. The price with which treasury bills are issued comes separate from that of the face value, and the face value is......

Words: 716 - Pages: 3

Capital Markets

...Capital Market and Money Markets A financial market that works as a conduit for demand and supply of debt and equity capital. It channels the money provided by savers and depository institutions like banks, credit unions, and insurance companies among others, to borrowers and investees through a variety of financial instruments like bonds, notes, and shares that are referred to as securities. A capital market is not a compact unit, but a highly decentralized system made up of three major parts: stock market, bond market, and money market. It also works as an exchange for trading existing claims on capital in the form of shares. Essentially, capital is wealth, usually in the form of money or property. Capital markets exist when two groups interact: those who are seeking capital and those who have capital to provide. The capital seekers are the businesses and governments (sometimes individuals) who want to finance their projects and enterprises by borrowing or selling equity stakes. The capital providers are the people and institutions who are willing to lend or buy, expecting to realize a profit. By participating in the stock and bond markets, which are the pillars of the capital markets, you commit your capital by investing in the equity or debt of issuers that you believe have a viable plan for using that capital. Because so many investors participate in the capital markets, they make it possible for enterprises to raise substantial sums enough to carry out much larger......

Words: 1385 - Pages: 6

Money Market

...Lecture 2 THE MONEY MARKET . Money Market Valuation Money market securities Financial Markets and Institutions Lecture content 2 After studying the material in this topic you should be able to: • „ explain the differences between the securities traded in the money market. • „ calculate the price of a money market security. • „describe the impact of changing yields and maturity on the price of a money market security. Financial Markets and Institutions Learning Objectives 3 • „The money market is an over-the-counter wholesale market. • „Short-term interest rate securities are traded in this market. These securities: • „have a maturity of less than one year. • „make only one payment, their face value at maturity. • „Their price is less than their face value. Financial Markets and Institutions MONEY MARKET 4 The Purpose of Money Markets • Borrowers from money market: provides low-cost source of temporary funds • Corporations and U.S. government use these markets because the timing of cash inflows and outflows are not well synchronized. Money markets provide a way to solve these cash-timing problems. Financial Markets and Institutions • Investors in Money Market: Provides a place for warehousing surplus funds for short periods of time 5 Money Market Securities • Characteristics: • • • • • Maturity within one year Low default risk They are issued by corporations and governments......

Words: 290 - Pages: 2

The Capital Market

...Chapter 1: The Capital Market [Simplified CSC Notes] • Capital is not what you make but what you keep • Wealth is savings, capital comes from savings • Savers: Individuals, corporations, governments • You can take your savings and go into Direct Investments (like property, equipment, infrastructure) - these are called real assets • Or you can take your savings into Indirect Investments (like stocks; we buy share of a company and we give company the money, bonds; we lend money to companies and governments, GIC; we leave money with the bank and the bank pays us a level of interest) - these are called financial assets/ claims • Bonds are claims against asset • The money we give to users, they give us one of these claims (financial assets), they take the money and invest in real assets, so we buy a stock of the company that buys apartment buildings. Either way we're still investing in apartment buildings, directly we own the real thing and indirectly have a financial claim on the real thing 3 Characteristics of Capital: 1) It is mobile - it can travel anywhere in the world 2) Sensitive to the environment - if you're in an area with high taxes you can move to an area with low taxes. If you're in an area with low interest rates, low returns you can move to an area with high interest rates, high returns to get a better yield 3) Scarce - you have so much of it • The only source of capital is savers. If somebody can't save, they have no investment......

Words: 1710 - Pages: 7

Capital Market

...the capital markets in Bangladesh, notably from December 2010 till February of 2011, has been very poor compared with its performance over the last five years. The index fell from a high of around 8,900 points to 5,200 points, a drop of almost 42 percent in just three months. Bangladesh capital markets have been in the top three best performing markets in the world over the last three years. However, its recent performance has cast a big doubt about its future performance. It is a case of “too much money chasing too few stocks”. This correction in the market has been long overdue because there was too much money in the stockmarket in too few stocks. This inflationary pressure was finally controlled by the central bank by raising its cash reserve ratio (CRR) and statutory liquidity ratio (SLR) thus resulting in limiting the liquidity flow into the capital market. The interbank call money rate (DIBOR Dhaka Interbank Offer Rate) went up by 189 percent. One of the main reasons for this was that the domestic banks had too much of their money invested in the stock market, for quick and easy profit taking and as a result caused the stock market to rise even higher. So, to control the excess money in the capital market the central bank took these drastic measures, as it is within their right to do so, to control inflation. The problems of the capital markets in Bangladesh are structural, and, actually quite far-reaching than what meets the eye. As we all know, the capital markets......

Words: 382 - Pages: 2

Capital and Money Market

...Ex-MBA 2010-2013 Batch II Semester -3 Subject : Capital and Money Markets CMM Assignment-2: Choose 20 manufacturing company which are traded on stock exchange on all working days and 5 years of working and should have average trading volume more than 50,000 with share price range should be 100 to 250.Evaluate only profitability ratios of these company and co-relate with return on capital employed and market capitalization. Executive Summary Following 20 manufacturing companies are considered for the assignment. |Sr. |Company |Industry | Trading |Share | |No. |Name | |Volume |Price( Rs.) | |1 |Tata Motors |Auto |2140263 |170.3 | |2 |Crompton Greaves |Electric Equipment |265566 |123.15 | |3 |ITC |Cigarettes |304792 |202.15 | |4 |Amar Remedies |Personal Care |199938 |123.25 | |5 |Astral......

Words: 3296 - Pages: 14

Money Market

...proved as well. Table of Content Introduction 1 Question 1 2 Question 2 11 Conclusion 12 References 13 Appendices 14 Introduction Monetary policy is usually implemented by the centre bank of a country. It is because the centre bank has a responsibility to implement it.(Edirisuriya, 2010) For instance, Bank Negara Malaysia (BNM) has the responsibility to implement monetary policy for Malaysia as it is the centre bank for the country. Furthermore, for the country of Malaysia, the interest rate is known as overnight rates. The changes in economic growth and business activity will be affected by the returns on investments and cost borrowing cost which is due to the changes in overnight rates as overnight rates are the price of money. Other than implementation of monetary policy by Bank Negara Malaysia, they also play other role such as bringing about the financial stability, development role, financial inclusion and act as a banker and adviser. In this report, we will focus only on monetary policy which is the major role by Bank Negara Malaysia (BNM). Since year 2004 until year 2010, the overnight rates in Malaysia have an average of 2.91%. In the past history on overnight rates of Malaysia, the highest record of interest rate rise up to 3.50% in April 2006 as for the lowest interest rate over the year is at 2.00% in February of 2009. The changes in overnight rates is depends on the economic performance of a country. If the economic growth of a country is......

Words: 5496 - Pages: 22