List and describe the
different types of
financial market
instruments.
1. Treasury Bills (T-Bills)
Treasury bills or T- Bills are issued by the Reserve Bank of India on behalf of the Central Government for raising money. They have short term maturities with highest upto one year. There are, 3 types of T- Bills with 3 different maturity periods, which are, 91 days T-Bills, 182 days T- Bills, 1 year T – Bills.
T-bills are issued at a discount to the face value. At maturity, the investor gets the face value amount.
2. Commercial Papers
They usually have a fixed maturity period which can range anywhere from 1 day up to 270 days.They give higher returns as in comparison to treasury bills. They are not very much secure in comparison. Also, Commercial papers are traded actively in secondary market.
3. Certificates of Deposits (CD)
CDs are financial assets that are issued by banks and financial institutions.
The maturity period of Certificates of Deposits ranges from 7 days to 1 year, if issued by banks. Other financial institutions can issue a CD with maturity ranging from 1 year to 3 years.
4. Repurchase Agreements
Also referred to as Reverse Repo or as Repos. They are loans of short period between buyers and sellers for the objective of selling and repurchasing. Repurchase Agreements is a proper contract among parties, in which one party sells a security to another, with the promise of purchasing it back at a later date from the buyer. It is likewise known as a Sell-Buy transaction.
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