Financial Markets Test - 27

A treasury bill is an instrument of short term debt. Treasury bills are sold with maturities of four, thirteen, twenty-six and fifty-two weeks.

An ideal capital market is defined by a set of five assumptions.

• Capital markets are frictionless.
• All market participants share homogenous expectation, valuerelevant information is costlessly available to all market participants.
• All market participants are atomistic. No single market participant can affect the market price of a security via trades.
• The firm’s investment program is fixed and known.
• The firm’s financing is fixed. Once chosen, the firm’s capital structure is fixed.

The money market is a market for short-term funds, which deals in financial assets whose period of maturity ranges up to one year.

Capital Market is an institutional arrangement for borrowing medium and long-term funds, and it also provides facilities for marketing and trading of securities.

A rights issue is a dividend of subscription rights to buy additional securities in a company made to the company's existing security holders. When the rights are for equity securities, such as shares, in a public company, it is a non-dilutive pro rata way to raise capital.

Primary and secondary markets complement each other. Primary market deals with the issue of new securities. On the other hand, secondary market deals in the purchase and sale of the existing securities. That is, once the securities are issued in primary market, they are then traded in the secondary market.

Working capital financing is done by various modes such as trade credit, cash and discount of bills, bank guarantee, letter of credit, factoring, commercial paper, working capital financing extensively used by all small and big businesses.

In India, shares and securities are held electronically in a dematerialized (Demat) account, instead of the investor taking physical possession of certificates. A Demat account is opened by the investor while registering with an investment broker (or sub-broker).

Capital Market is a place where long-term funds are mobilised by the corporate undertakings and Government, where both debt and equity are raised and invested. Capital Market can be divided into primary market and secondary market.

Under this Section, a collecting bank has protection only if the collecting bank, in good faith and without negligence, receives payment of the customer by a cheque, i.e. if there is negligence in receiving of a cheque on behalf of the customer, the collecting bank would be liable for negligence.

Capital Market is a market dealing in medium and long-term funds. It is an institutional arrangement for borrowing medium and long-term funds and which provides facilities for marketing and trading of securities.