Financial Instruments such as Call Money, commercial

Solution

Money Market Instruments are simply the instruments or tools which can help one operate in the money market. These instruments serve a dual purpose of not only allowing borrowers meet their short-term requirements but also provide easy liquidity to lenders. Some of the common money market instruments include Treasury Bills (T-bills), Repurchase Agreements (repo transactions), Certificate of Deposits (CoD) and Commercial Papers (CP). Some of the notable characteristics of money market instruments are as follows. ·         Liquidity  – Money market instruments are highly liquid because they are fixed-income securities which carry short maturity periods of a year or less. ·         Safety  – Issuers of money market instruments usually have strong credit ratings, indicating higher safety. Discount Pricing  – Another important characteristic feature of money market instruments is that they are issued at a discount on their face value i.e. they are usually in the nature of zero-coupon instruments.