Name: Jewel E.

Breboneria Date: September 16, 2020

Section: AC23
“MONEY MARKET INSTRUMENTS AND THEIR USES”
Title
1. Treasury Bills

-Treasury Bills are a short-term financial instrument. The issuing company

creates these instruments for the express purpose of raising funds to
further finance business activities and expansion.

2. Commercial Papers

-Commercial paper is a commonly used type of unsecured, short-term

debt instrument issued by corporations, typically used for the financing of payroll,
accounts payable and inventories, and meeting other short-term liabilities.
3. Negotiable Certificate of Deposit

-A negotiable certificate of Deposit is guaranteed by the bank and can usually be

sold in a highly liquid secondary market, but they cannot be cashed in before maturity.
Because of their large denominations, NCDs are bought most often by large institutional
investors that typically use them as a way to invest in a low-risk, low-interest security.

4. Repurchase Agreement
- A repurchase agreement is a form of short-term borrowing for dealers in
government securities. A dealer sells government securities to investors, usually on an
overnight basis, and buys them back the following day at a slightly higher price. That
small difference in price is the implicit overnight interest rate. Repos are typically used
to raise short-term capital. They are also a common tool of central bank open market
operations.
5. Federal funds

-federal funds are overnight borrowings between banks and other entities to
maintain their bank reserves at the Federal Reserve. Transactions in the federal funds
market enable depository institutions with reserve balances in excess of reserve
requirements to lend reserves to institutions with reserve deficiencies. These loans are
usually made for one day only. The interest rate at which these deals are done is called
the federal funds rate. Federal funds are not collateralized, they are an unsecured
interbank loan. Federal funds transactions by regulated financial institutions neither
increase nor decrease total reserves in the banking system as a whole. Instead, they
redistribute reserves.

6. Banker’s acceptance

-is a commercial bank draft requiring the bank to pay the holder of the
instrument a specified amount on a specified date, which is typically 90 days from the
date of issue, but can range from 1 to 180 days. Banker’s Acceptance are used by
companies as a relatively safe form of payment for large transactions and is used for
international trade as means of ensuring payment.