Financial Markets & institutions Assignment Example | Topics and Well Written Essays - 1000 words

Financial Markets & institutions - Assignment Example(Lure 15)Example 100.00 Euros are provided by a company for a menstruum of one year at rate of 3 per cent. At the end of the year it expects to receive 1030.00 Euros. However, the bank supposes 10 per cent rate inflation in the next year it will want 1133.00 Euros. The interest rate expected by the bank will sum up to 13.3 per cent.Treasury Bill (T-Bill) are simple market securities issued by the government. T-Bills are short-term securities used by the government to collect money from the public. In purchasing of T-Bills, the holder will patch up a price that is less than the face or par value of it. (Kawai 16) T-Bills mature afterward three months, half a year or after a year of issuance. The government will then pay the holder the full face value. T-Bill provides guarantee and safety returns because it has full back and faith of the government. Investors modify money to the government get their money back with interest. Lim ited access is one of the drawbacks of T-Bills. Investors who need to go to sleep their money before the maturity dates are reached be in possession of to pay a penalty. T-Bills have little returns because of lees maturity period mostly not more than one-year thus low amount of interest. (Kawai 21)The banks or book of facts unions issue certificates of deposit (CDs) to holders who have deposited funds to the bank. CDs limit the holders from withdrawing the funds when in need of cash until a set period of time elapses. When one has to withdraw fund from the bank a penalty is incurred. CDs are secured form of investments and they offer high amount of returns. CDs are not prone to risk, pensions and instability. Disadvantages of certificate of Deposits are that they bring a high amount of initial capital than that for saving account. Investors obtain little returns from CDs thus a drawback.Companies create corporate bonds by giving debts with the compute of raising capital. Bond p rovide fixed amount of income and