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Understanding Municipal Notes and Capital Markets

Municipal notes are short-term debt instruments issued by cities and states to raise cash for projects like roads and bridges. The interest on these notes is exempt from federal taxes. Local governments use municipal notes to fund capital expenditures that will benefit the region. The capital market raises capital from investors to provide funding for companies and government projects. It includes bond and stock markets. Capital market instruments are shares (equity and preference), debentures, bonds, and derivatives which derive their price and risk from underlying assets like futures, options, swaps, and forwards.

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Khristialynne De Leon
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49 views2 pages

Understanding Municipal Notes and Capital Markets

Municipal notes are short-term debt instruments issued by cities and states to raise cash for projects like roads and bridges. The interest on these notes is exempt from federal taxes. Local governments use municipal notes to fund capital expenditures that will benefit the region. The capital market raises capital from investors to provide funding for companies and government projects. It includes bond and stock markets. Capital market instruments are shares (equity and preference), debentures, bonds, and derivatives which derive their price and risk from underlying assets like futures, options, swaps, and forwards.

Uploaded by

Khristialynne De Leon
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

Municipal Notes:

Cities and states issue short-term bills to raise cash. The interest payments on thes
e are exempt from federal taxes. Local governments issue municipal notes to raise money
usually for capital expenditures, for roads construction, bridges, etc. that will the region.

2.7. CAPITAL MARKET INSTRUMENTS

Capital Market, which is also known as the securities market is a trading market th
at raises capital from the investors and makes them available to companies and the gover
nment for development of projects. The capital market includes the bond market and the
stock market among others. The capital market consists of development bank, commercial
banks and stock exchanges.

The instruments issued in capital markets are listed below:

1. Shares:

Share is the share in the share capital of the company. Share is one of the units into
which the capital of company is divided. A person having the shares of the company is cal
led as shareholder of that company, He is regarded as the part of owner of the company.

There are 2 types of shares:

 Equity shares
 Preference shares

2. Debentures :

Debentures are long term borrowed funds of the company. They have fixed maturity p
eriod as well as fixed interest rate. These are the certificates issued under common seal of
the company.

3. Bonds:

Bonds are the long term borrowed funds of the government and also companies. Li
ke debentures have fixed maturity and fixed interest rate even bonds have. Here interest c
harged on bonds termed as coupon rate.

4. Derivatives:

These are instruments that derive from other securities, which are referred to as u
nderlying assets. The price, riskiness and function of the derivative depend on the underlyi
ng assets since whatever affects the underlying asset must affect the derivative.
Some examples of derivatives are:

 Futures
 Options
 Swaps
 Forward

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