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In: Finance
What is the main characteristic of money market transactions which enables it to have active secondary...
What is the main characteristic of money market transactions which enables it to have active secondary market ?
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Expert Solution
Money market is used by firms to raise funds for short period of time .The funds are raised by transactions of short term debt.The funds raised by transactions in the money market are used by the firms in order to meet their requirement of funds for immediate operations.Repurchase agreements,federal funds municipal notes ,commerical paper treasury bills etc are the various money market instruments.Maturity of money market instruments range from one day to an year.Money market is utilized by firms in order to stabilize their cash flow.The rate of return in money market is low.The main characteristics of money market transactions are liquiduty and safety .Money market investments are highly liquid which translates to easily convertible to cash.This high liquidity of money market instruments is why they are considered safe,due to these reasons money market trasnactions have an active secondary market
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