Question

Discuss how the liquidity function of financial markets affect the overall role of treasurers, in relation to the importance of the Time Value of Money in secondary market of bonds, in Zambia

Answer 1

Time value of money will be focusing at receiving of the money at the present rather than receiving of the money at the future because it will be having an element of depreciation of money due to factors of inflation.

when we will be looking at the liquidity function of the financial market, it will mean that markets will be providing with a high liquidity and easy entry and easy exit due to large number of buyers and sellers interacting with each other and treasurer's need to consider the trading of the bonds in the secondary market as secondary markets are often a reflecting all the securities which has already been issued so bonds which are already issued are traded in the secondary market and the rates of the bonds can be derived out of the secondary market and treasurer will be able to find out the policy formation strategies because there would be a high liquidity associated with trading of the bonds in the financial market and it will be helping the treasurers in order to prepare with his strategy.

So, due to high amount of liquidity present in the secondary markets of the bond market segment treasurers will be having a better idea about fluctuations and they are shown with the transparent quotes after interaction of a large number of buyers and sellers.