Question

QUE //

UE//VIVIDLY DISCUSS THE FOLLOWING FINANCIAL MARKET ANALYSIS OF BRAZIL

a) . Liquidity b) Capital Market c) Stock d) Bond Market e) Market Capitalization f) Money Market e) Treasury Bills f) Commercial paper and Bank Transaction Account

Answer 1

a. Liquidity is something which can be easily converted to cash. Examples like mutual funds (n+2 days) amount will be credited from the day of sell off), shares, bonds, government treasury bills et., are easily converted to cash. Investors who forsees a money requirement or want to invest in less risk instruments, they opt for the liquid investments like above mentioned. Iilliquid assets like real estate properties, stocks will less trading volume, penny stocks takes time to convert these assets into cash.

b.Capital markets comprises of c.stock and d.bond market that raises the capital for the long term needs of the borrowers. The borrowers are generally the companies, banks, financial institutions etc. The suppliers of the capital are retail investors, mutual funds, private equity funds etc. These stock and bonds are called financial assets and are traded in the exchanges for the sake of the liquidity. Capital markets are the places where capital reaches to the needy from those who expects some premium on that. Generally, these are long term in nature. One who invested in stock benefits from the dividends paid by the companies and capital appreciation of these stock in the medium to long term and bond holders recieve fixed annual coupon and also exploit the increase in the bond rices.

e. Market capitalization is nothing but the total number of shares of a company has * current price of the share.

This tells you that how much a company's equity is valued at. The higher the market captilization, the better investors having confidence in the compny's future performance.

f. Money market is a financial market to borrow and lend in short term nature. There are number of financial instruments that fall under this category. g. Treasury bills (issued by the governments) h. Commercial paper (issued by the corporates), certificate of deposits (issued by the banks) for their short term requirements. Generally, the tenor will be less than a year. If government needs money due to their revenue deficit or expenditure, they issue treasury bills in different maturities and in the same way, corporates issue commercial paper for their requirements.

i. Bank transaction account is nothing but an account that opened with a bank for the financial transactions. It is used to pay money, issue cheques, to recieve money. This is very useful for any one ranging from individual to MNC's.