explain why money market interest rates move so closely together over time

Expert Solution

Money market interest rates are moving closely together over time because they are mostly representing the short-term interest rates and this money market securities are always short term securities so they are always reflecting high liquidity and discounting the the interest rates quickly because there will be highly sensitive to any kind of changes in the interest rate so they will be moving very closely together over time because they are all representation of the smaller time frame and short term interest rate.

Money market instruments are generally highly liquid instruments and they are floated by various companies for the shorter period of time and they will be highly sensitive to the interest rate changes in the external environment and they will be quickly discounting them into the prices because these securities are having a low maturity period and hence they will be moving very closely together over time due to short maturity and it almost similar characteristics of higher liquidity and lower maturity period.

jeff jeffy answered 2 years ago

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