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What is the Money Market?

The money market includes treasury bills, commercial papers, certificate of deposits etc.

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Last Updated: Apr 06, 2020, 11.54 AM IST
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Companies normally raise short-term funds by selling commercial papers in the market.
Money market is the financial market where securities of short-term maturities (one year or less) are bought and sold. This includes treasury bills, commercial papers, certificate of deposits etc.

The market is used for borrowing and lending for the short term. The money market is different from the capital market. Where the former is for a shorter period, latter is for longer periods.

Companies normally raise short-term funds by selling commercial papers in the market. It is considered a safe place to invest due to the high liquidity of securities. However, defaults on securities is one of the major risks in the money market.

Banker’s Acceptance, Treasury Bills, Repurchase Agreements and Certificate of Deposits are other examples of money market. These instruments allow borrowers to meet their short-term requirements and provide easy liquidity to lenders.

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