Money market & Capital market

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Beware, never use golden or yellow color in your slide cause it flashes in projector. By the way, it isn't the best work I have done but it is among my first slides so I just love it. Hope you too...

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Money market & Capital market

  1. 1. Money Market The organization for the lending of short-term fund, through the use of such instruments as commercial bills of exchange, short-term government securities and bankers acceptance.
  2. 2. Functions of Money Market • transfer of large sums of money • transfer from parties with surplus funds to parties with a deficit • allow governments to raise funds • help to implement monetary policy • determine short-term interest rates • Medium to control creation of Credit
  3. 3. Composition of Money Market Call Money Market Collateral Loan Market Acceptance Market Bill or Discount Market
  4. 4. Financial institutes of Money Market The Central Bank Commercial Bank Institutional Investors Private Individuals, partnership and Companies
  5. 5. Characteristics of a Developed Money Market Highly organized commercial Banking System Presence of a Central Bank Availability of proper Credit Instrument Existence of a number of sub-markets
  6. 6. Usefulness of a Developed Money Market Financing in Industry and Commerce Investment of short-term Funds Help to the Central Bank Help to the Government
  7. 7. Structure of Money Market
  8. 8. Characteristics of Money Market Lacking's of short term assets No intermediaries between the Gov. and banking system Doesn’t contain any sub-markets Deficit of proper between different sectors of Money Market BB has lack of enough power to control Money Market
  9. 9. Defects of Money Market • Loose and Disjoined Structure • Wasteful Competition • • • Shortage of Capital Inadequate Banking Facilities Seasonal Shortage of Funds • Disparity in Interest rates in Different Centers • Undeveloped Bill Market • Inelasticity and Instability • Absence of Sub-Markets • Insensitive to International Influence
  10. 10. Measure for Improvement of the Money Market • Steps has been taken to establish relations between indigenous bankers and commercial banker • Reducing monetary shortages through open market operations • Diversifying the Market • Access to bill rediscounting market increasingly
  11. 11. Suggestion to remove defects • The activities of the money lender and chit fund should brought under control • Banking facilities should be extended, especially in the unbanked and neglected areas • The number of clearing house should be increased • Adequate and easy remittance facilities should be provided to the businessman • Harmony between sub-markets and co-ordination of their activities must be achieved
  12. 12. Recent innovations in the Money Market • 91 days T- bill • 182 days T- bill • 364 days T- bill • 2 years T-bond • 5 years T-bond • 10 years T-bond • 20 years T-bond
  13. 13. The Repo Market Repo is a money market instrument which helps in collateralized shortterm borrowing and lending through sale/purchase operations in debt instrument. Under a repo transaction, securities are sold by their holder to an investor with an agreement to purchase them at a predetermined rate and date.
  14. 14. The Commercial Bill Market The Commercial bill market is the sub-market in which the trade bills or the commercial bills are handled. The Commercial bill is a bill drawn by one merchant firm on the other. Generally, Commercial bills arise out of the domestic transactions. The legitimate purpose of a commercial bill is to reimburse the seller while the buyer delays payment.
  15. 15. The Certificate of Deposit Market A Certificate of Deposit (CD) is a time deposit with a bank. CDs are generally issued by commercial banks but they can be bought through brokerages. They bear a specific maturity date (from three months to five years), a specified interest rate, and can be issued in any denomination, much like bonds. Like all time deposits, the funds may not be withdrawn on demand like those in a checking account.
  16. 16. The Commercial Paper Market In the global money market, commercial paper is an unsecured promissory note with a fixed maturity of no more than 270 days. Commercial paper is a money-market security issued (sold) by large corporation to get money to meet short term debt obligations (for example, payroll), and is only backed by an issuing bank or corporation's promise to pay the face amount on the maturity date specified on the note.
  17. 17. Money Market Mutual Fund A Certificate of Deposit (CD) is a time deposit with a bank. CDs are generally issued by commercial banks but they can be bought through brokerages. They bear a specific maturity date (from three months to five years), a specified interest rate, and can be issued in any denomination, much like bonds. Like all time deposits, the funds may not be withdrawn on demand like those in a checking account.
  18. 18. Capital Market A market in which individuals and institutions trade financial securities. Organizations/institutions in the public and private sectors also often sell securities on the capital markets in order to raise funds. Thus, this type of market is composed of both the primary and secondary markets.
  19. 19. Classification of Capital Market The Capital Market of Bangladesh consists of two part. They are1. Primary Market: The Primary Market is a place where new shares and bonds are offered. 2. Secondary Market: Secondary market is a place where existing shares and debentures are treaded.
  20. 20. Importance of Capital Market • Mobilizing Savings: The capital market plays a vital role in mobilizing savings to put it in productive investment, so that the development of trade, commerce and industry could be facilitated. • Stability in Value: In case of a developed capital market, the experts in banking and non-banking intermediaries put in every effort in stabilizing the values of stocks and securities. • Encouragement to Economic Growth: The various institutions of the capital market give quantitative and qualitative direction to the flow of funds that cause economic growth. • Inducement to Savings: Savings are the backbone of any nation’s economic development. If capital markets are developed in less developed areas, people will get induced to save more because savings are facilitated by banking and non-banking financial intermediaries.
  21. 21. Functions of Capital Market • Mobilization of financial resources on a nation wide scale, • Securing the foreign capital and know how to fill up the deficit in the required resources for economic growth at a faster rate, • Effective allocation of the mobilized financial resources by directing the same to projects yielding highest yield to the projects needed to promote balanced economic development.
  22. 22. Structure of Capital Market Structure of Money Market Organized Sector Individual Investors Investment Intermediaries Financial Institutions Commercial Bank Government Unorganized Sector Agricultures Private Individual
  23. 23. COMPONENTS OF BANGLADESI CAPITAL MARKET • New Issue Market: The new issue market is called primary market where new shares or bonds are offered. Both the new companies and existing ones raise capital on the new issue market. • Stock Market: Secondary or stock market represents the secondary market where existing shares and debentures are traded. Stock exchange provides an organized mechanism of purchase and sale of existing securities. • Financial Institutions: Special financial institutions are the most active constituents of Money Market. Such organizations provide medium and long-term loans repayable on easy instalments to big business houses.
  24. 24. RECENT TRENDS IN THE CAPITAL MARKET 1. Growth of Capital Market 2. New Financial Instruments 3. New Specialized Financial Institution 4. Financial Services 5. Regulation of Capital Market
  25. 25. SIMILALARITES OF MONEY MARKET and CAPITAL MARKET • Complementary: The Money Market and the Capital Market are complementary to each other and are not competitive. The difference between two is only of degree rather than of kind. • Same Institutions: Certain institutions operate in money as well as capital markets. For example, commercial banks operate in money market as well as in Capital Market. • Interdependence: Money Market and Capital Market are interdependent. The activities and policies of one market have their impact on those of the other.
  26. 26. DIFFERECES BETWEEN MONEY MARKET and CAPITAL MARKET 1. Maturity Period 2. Credit Instruments 3. Institutions 4. Risk 5. Market Regulation 6. Relation with Central Bank
  27. 27. We present our gratitude to everyone for listening • Any questions that have raised in your mind?

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