Assignment 2 Example | Topics and Well Written Essays - 1000 words - 1

2 - Assignment Example this report looks at the various risks associated with both the money market and capital market in addition to a comparison with the existing market data. Final recommendations are also provided in light of the risks and benefits identified. These refer to the elements of financial markets that mature within a short time, usually within one year or less. Otherwise known as debt securities, they are mainly issued to individuals interested in obtaining short-term financing. In essence, the money market is specifically the financial market for short term liquidity within the international financial system. It is made up of various parties that are classified as borrowers and lenders as per their activity in the market. These parties also include the financial intermediaries, the companies, and the treasury that issues the telecommunication network in the primary market. One of the main features of the money market securities is their liquidity, and the fact that they can easily be sold in a secondary market. The following are the major features of the money market instruments: Treasury Bills – this is a way that the US government uses to generate money from the public. They are sold at a certain discount below their face value and can be issued with different maturity rates such as one, three, or six months. T-bills have certain advantages such that they are generally affordable due to their discounts. They are also the safest securities due to their backing by the US government. In addition they are exempted from both state and local taxes. T-bills work in such a manner that an investor can submit competitive or non-competitive bids for which they receive full amounts of the determined securities. For competitive bidding, one submits the return they would like to receive. Consequently, a higher return might mean no limited securities. Commercial paper – this refers to a short-term loan that a corporation issues in order that it may finance inventories. It