Features of Money Market (Short Term) - SS2 Accounting Lesson Note
The money market is a financial market where short-term financial instruments are traded, such as treasury bills, certificates of deposit, commercial paper, and banker's acceptances. Here are some of the key features of the money market:
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Short-term maturity: The instruments traded in the money market have a maturity of one year or less, which means they are considered to be very liquid and can be easily bought or sold.
Low risk: The money market is considered to be a low-risk investment because the financial instruments traded in this market are issued by reputable and creditworthy institutions, such as governments and large corporations.
Low return: Because of the low risk associated with investing in the money market, the returns on these investments are typically lower than those of other types of investments, such as stocks and bonds.
Highly regulated: The money market is highly regulated to ensure the safety and stability of the financial system. For example, the Federal Reserve sets the interest rates for many of the financial instruments traded in the U.S. money market.
OTC market: The money market is an over-the-counter (OTC) market, which means that trades are conducted directly between buyers and sellers, without the need for a centralized exchange.