|
Negotiable CDs are a type of CD
issued in denominations over $100,000 and sold on the open market. The depositor
of a negotiable CD is allowed to negotiate the interest rate with the bank. They
have maturities ranging from 30 days to more than one year.
Treasury bills (T-bills) are federal government
issues sold for discounts at auctions. They mature in 90, 180, or 360 days. The
minimum face value sold is $10,000.
Commercial paper is an unsecured, short-term IOU
issued by corporations with good credit. These corporations use them to buy
inventories. Companies discount and sell commercial paper to other companies and
sometimes to individual investors. Maturities are 270 or fewer days.
Banks that want to finance importing and exporting with
firms in foreign countries use banker's acceptances. A bank pays a
foreign party on behalf of an importer and assumes liability. Banker's
acceptances are usually issued in denominations over $100,000.
A repurchase agreement (repo) is a contract
between a buyer and a seller of debt securities, stating that the seller will
repurchase the securities after a certain length of time or after certain
conditions are met. A bank or dealer sells some of its securities to another
party, who buys it back at a higher price. Maturities range from one to 90
days.
Money market mutual funds are pools of money market
securities. The funds use money from large numbers of investors to buy these
securities. They make investing in this market easy for small investors.
|
