2. FINANCIAL MARKET
FINANCIAL MARKET
It is a place where buyers and sellers
come together to exchange assets
and where prices are set based on
supply and demand.
A financial market refers to a
marketplace where financial
instruments are traded, such as
stocks, bonds, commodities, and
derivatives.
4. MONEY MARKET
As per RBI “ A market for short terms financial
assets that are close substitute for money,
facilitates the exchange of money in primary and
secondary market”.
A mechanism that deals with the lending and
borrowing of short term funds.
A segment of the financial market in which financial
instruments with high liquidity and very short
maturities are traded.
5. COMPOSITION OF MONEY MARKET
$ 100
Million
+25%
350
Days
15%
Call Money
Treasury Bills
Commercial Bill
Commercial Paper
Certificates of deposit (CDs)
6. Call money refers to short-term loans provided by banks
and financial institutions to other banks and financial
institutions for a period of one day.
These loans are typically unsecured and are used to meet
short-term funding needs, such as to manage liquidity or to
finance a transaction.
CallMoney
Make a budget
Make a decision
Call money allows banks to earn interest, known as
the call loan rate, on their surplus funds
7. The maturity period of T-bills varies, but typically
ranges from four weeks to one year
(14 days, 182days ,91days and 364days)
A T-bill, or Treasury bill, is a short-term debt security
issued by Government and largely held by RBI.
. T-bills are sold at a discount to their face value, and the
investor receives the face value of the bill when it
matures.
The Treasury BillMarket
8. Commercial bills typically have maturities ranging
from 1 to 270 days.
Unlike Treasury bills, which are issued by the
government, commercial bills are issued by
corporations or financial institutions.
A commercial bill, also known as commercial paper or
CP, is a short-term debt security issued by corporations or
financial institutions to finance their immediate cash
needs.
Commercial Bill Market
9. Commercial paper (CP) is a type of unsecured, short-term
debt security issued by corporations and financial
institutions to raise capital to finance their short-term
needs
Commercial paper
Make a budget
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The maturity period of commercial paper ranges
from a few days to up to 270 days
Commercial paper is typically issued at a discount
to its face value and is redeemed at maturity for
the full face value.
10. Finance is a term related to financial
affairs. When it comes to financing.
Make a
Office
A Certificate of Deposit (CD) is a type of time deposit
offered by banks and credit unions, where an investor
deposits a sum of money for a fixed period of time,
ranging from a few months to several years.
The investor receives a fixed interest rate on their
deposit, which is typically higher than the interest
rates offered on traditional savings accounts.
Certificate of Deposit (CD)
11. Capital Market
The capital market is a financial market where long-term
debt and equity securities are traded between investors
and issuers. It includes both primary markets and
secondary markets,
The capital market plays a crucial role in facilitating the
transfer of funds between investors and issuers. It provides a
platform for corporations, governments, and other entities to
raise long-term capital to finance their operations, expansion,
and investments.
12. Some key players in the
secondary market include:
Stock Exchanges
Brokers and Dealers:
Investment Banks
Commercial Banks
Regulators:
1.
2.
3.
4.
5.
13. The primary market is the part of the capital market
where new securities are issued and sold for the first
time by issuers to investors. It is also known as the new
issue market.
In the primary market, issuers raise funds by selling
securities, such as stocks, bonds, or other debt
instruments, directly to investors.
Primary Market
14. The secondary market is the part of the capital
market where existing securities, such as stocks and
bonds, are traded between investors. It is also known
as the stock market or the exchange market.
In the secondary market, investors buy and sell securities
that have already been issued and are now being
traded among investors.
The prices of securities in the secondary market are
determined by supply and demand
Secondary Market
15. Which would you prefer-- $10,000
today or $10,000 in 5years?
Obviously, $10,000today.
You already recognize that there is
TIMEVALUE TO MONEY!
16. Time line:
An important tool used in the time value of money
analysis; it is a graphical representation used to show
the timing of cash flows.
0 1 2 3 4 5 6
Translating a value to the present is referred to as
Discounting.
Translating a value to the future is referred to as
Compounding.
17. Present value refers to the current value of a future sum of
money, taking into account the effects of inflation and the time
value of money.
Present value:
PV=present value
FV=future value
i = interest rate or rate of return
n= number of periods
1/(1+i)n =present value(interest)factor
Where,
It can be calculated as
18. The amount to which a cash flow or a series of cash
flows will grow over a period of time when
compounded at a given interest rate.
It can be calculated as;
FV = PV (1+i)n
Future value (FV):
FV = future value or ending amount
PV = present value or beginning amount
i = interest rate per period
n = the number of periods
(1+i)n = future value (interest) factor
Where,
