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Samacheer Kalvi 12th Commerce Chapter 6 Money Market Notes PDF Download: Tamil Nadu STD 12th Commerce Chapter 6 Money Market Notes

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Samacheer Kalvi 12th Commerce Chapter 6 Money Market Notes PDF Download: Tamil Nadu STD 12th Commerce Chapter 6 Money Market Notes
Samacheer Kalvi 12th Commerce Chapter 6 Money Market Notes PDF Download: Tamil Nadu STD 12th Commerce Chapter 6 Money Market Notes


Samacheer Kalvi 12th Commerce Chapter 6 Money Market Notes PDF Download: Students of class can download the Samacheer Kalvi 12th Commerce Chapter 6 Money Market Notes PDF Download from our website. We have uploaded the Samacheer Kalvi 12th Commerce Chapter 6 Money Market notes according to the latest chapters present in the syllabus. Download Samacheer Kalvi 12th Commerce Chapter 6 Money Market Chapter Wise Notes PDF from the links provided in this article.


Samacheer Kalvi 12th Commerce Chapter 6 Money Market Notes PDF Download

We bring to you specially curated Samacheer Kalvi 12th Commerce Chapter 6 Money Market Notes PDF which have been prepared by our subject experts after carefully following the trend of the exam in the last few years. The notes will not only serve for revision purposes, but also will have several cuts and easy methods to go about a difficult problem.


Board

Tamilnadu Board

Study Material

Notes

Class

Samacheer Kalvi 12th Commerce

Subject

12th Commerce

Chapter

Chapter 6 Money Market

Format

PDF

Provider

Samacheer Kalvi Books

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Download Samacheer Kalvi 12th Commerce Chapter 6 Money Market Chapterwise Notes PDF

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Question 1.
The money invested in the call money market provides high liquidity with ………………
a) Low Profitability
b) High Profitability
c) Limited Profitability
d) Medium Profitability
Answer :
a) Low Profitability

Question 2.
A major player in the money market is the ……………..
a) Commercial Bank
b) Reserve Bank of India
c) State Bank of India
d) Central Bank
Answer :
a) Commercial Bank

Question 3.
Money Market provides………………
a) Medium – term Funds
b) Short – term Funds
c) Long – term Funds
d) Shares
Answer :
b) Short – term Funds

Question 4.
Money Market Institutions are …………………..
a) Investment Houses
b) Mortgage Banks
c) Reserve Bank of India
d) Commercial Banks and Discount Houses
Answer :
d) Commercial Banks and Discount Houses

Question 5.
Risk in the Money Market is ……………….
a) High
b) Market Risk
c) Low Credit and Market Risk
d) Medium Risk
Answer :
c) Low Credit and Market Risk

Question 6.
Debt Instruments are issued by Corporate Houses are raising short-term financial resources from the money market are called …………………..
a) Treasury Bills
b) Commercial Paper
c) Certificate of Deposit
d) Government Securities
Answer :
b) Commercial Paper

Question 7.
The market for buying and selling of Commercial Bills of Exchange is known as a …………………. .
a) Commercial Paper Market
b) Treasury Bill Market
c) Commercial Bill Market
d) Capital Market
Answer :
c) Commercial Bill Market

Question 8.
A marketable document of title to a time deposit for a specified period may be referred to as a …………………
a) Treasury Bill
b) Certificate of Deposit
c) Commercial Bill
d) Government Securities
Answer :
b) Certificate of Deposit

Question 9.
Treasury Bill commands ……………
a) High Liquidity
b) Low Liquidity
c) Medium Liquidity
d) Limited Liquidity
Answer :
a) High Liquidity

Question 10.
Government Securities are issued by agencies such as ……………..
a) Central Government
b) State Governments
c) Semi-government Authorities
d) All of the above
Answer:
d) All of the above

II. Very Short Answer Questions.

Question 1.
Define the term “Money Market”.
Answer:
According to Crowther, ’’the money market is the collective name given to the various firms and institutions that deal in the various grades of near money”.

Question 2.
What is a CD market?
Answer:
The Certificate Deposit market is a market where buying and selling of certificate deposits is known as “CD market”.

Question 3.
What is Government Securities Market?
Answer:
Certificate of Deposits is a short-term deposit instrument issued by banks and financial institutions to raise large sums of money. The Certificate of Deposit is transferable from one party to another. Due to their negotiable feature, they are also known as negotiable certificates of deposit.

Question 4.
“What do you mean by Auctioning?
Answer :

  • “Auctioning” is a method of trading by merchants.
  • Whereby merchants bid against one another.
  • The securities are sold to the highest bidder.

Question 5.
What do you mean by Switching?
Answer:

  1. Treasury Bills in the Treasury Market
  2. Money at Call and Short Notice in the Call Loan Market
  3. Commercial Bills and Promissory Notes in the Bill Market

Now in addition to the above, the following new instruments come into existence:

  1. Commercial Papers
  2. Certificate of Deposits
  3. Inter-Bank Participation Certificates
  4. Repo Instruments

III. Short Answer Questions.

Question 1.
What are the features of Treasury Bills? (FILM V)
Answer:
Features:

  1. Issuer
  2. Finance Bills
  3. Liquidity
  4. Vital Source
  5. Monetary Management

Question 2.
Who are the participants of the Money Market?
Answer:

  • Central Banks of different countries.
  • Government of different countries.
  • Private and Public Banks.
  • Mutual Funds Institutions.
  • Public.
  • RBI and SBI.
  • Insurance Companies.
  • Non-Banking Financial Institutions.
  • Commercial Banks.
  • State Governments.

Question 3.
Explain the types of Treasury Bills.
Answer:
Treasury Bills are issued to the public and other financial institutions for meeting the short term financial requirements of the Central Government.
Treasury Bills may be classified into three. They are:

  1. 91 days Treasury Bills
  2. 182 days Treasury Bills
  3. 364 days Treasury Bills

Question 4.
What are the features of a Certificate of Deposit? (TINDU)
Answer:

  • Transfer freely by endorsement and delivery.
  • Issued at discount to face value.
  • No grace days. Repayable on a fixed date.
  • Document of title to Time Deposit.
  • Unsecured negotiable instruments.

Question 5.
What are the types of Commercial Bill?
Answer:

  1. Demand and Usance Bills
  2. Clean bills and documentary Bills
  3. Inland bills and Foreign Bills
  4. Indigenous Bills
  5. Accommodation and supply Bills

IV. Long Answer Questions.

Question 1.
Differentiate between the Money Market and Capital Market.
Answer :
Money Market – Definition :
“The Money Market is the collective name given to the various firms and institutions that deal in the various grades of near money”. – CROWTHER

Capital Market – Definition :
“A complex of institutions investments and practices with established links between the demand for and supply of different types of capital gains”. – ARUN K. DATTA RURALD

Basis of Difference Money Market Capital Market
1 Regulator Central Bank is the Regulator Central Bank and SEBI are the Regulators.
2 Underwriting Underwriting is not a primary function. It is a primary function
3 Risk Low credit and market risk. High credit and market risk.
4 Availability of Instruments Money Market instruments
generally do not have a secondary market.		 Capital Market
instruments generally have
secondary market.
5 Liquidity High liquidity Low liquidity
6 Duration Short-term loanable Funds not exceeding one year. Long-term loanable Funds
exceeding one year.

Question 2.
Explain the characteristics of the Money Market? (SMS WED)
Answer:

  1. Short-term Funds: It is a market purely for short-term funds or financial assets called near money.
  2. Maturity Period: It deals with financial assets having a maturity period upto one year only.
  3. Conversion of Cash: It deals with only those assets which can be converted into cash readily without loss and with minimum transaction cost.
  4. No Formal Place: Generally, transactions take place through phone, i.e., oral communication. Relevant documents and written communications can be exchanged subsequently.
  5. Sub-markets: It is not a single homogeneous market. It comprises several sub-markets each specialising in a particular type of financing.
  6. Role of Market: The components of a money market are the Central Bank, Commercial Banks. Commercial banks generally play a dominant role in this market.
  7. Highly Organized Banking System: The Commercial Banks are the nerve centre of the whole money market. They are the principal suppliers of short-term funds.
  8. Existence of Secondary Market: There should be an active secondary market for these instruments.
  9. Demand and Supply of Funds: There should be a large demand and supply of short-term funds.
  10. Wholesale Market: It is a wholesale market and the volume of funds or financial assets traded in the market is very large.
  11. Flexibility: Due to greater flexibility in the regulatory framework, there are constant endeavors for introducing new instruments.
  12. Presence of a Central Bank: The central bank keeps their cash reserves and provides them financial accommodation in difficulties by discounting their eligible securities.

Question 3.
Explain the Instruments of the Money Market.
Answer :
Instruments of Money Market:

  • Treasury Bills.
  • Money at call and short notice.
  • Commercial Bills and Promissory Notes.
  • Inter-Bank participation certificate.
  • Commercial papers.
  • Certificate of Deposit.
  • Repo instruments.

Treasury Bills:

  • Treasury Bills are very popular and enjoy a higher degree of liquidity since they are issued by the Government.
  • It is nothing but a promissory note issued for a specific period stated therein.
  • The Government promises to pay the specified amount mentioned there to the bearer of the instrument on the due date.
  • The period does not exceed a period of one year.

Commercial Bill:

  • A Bill of Exchange issued by a commercial organization to raise money for short-term needs.
  • These bills are of 30 days, 60 days, and 90 days maturity.
  • It is drawn by a seller of goods on a buyer of goods.

Certificate of Deposits[CD]:

  • Certificate of Deposits is short-term deposit instruments issued by Banks and financial institutions to raise large sums of money.
  • These are issued in the form of usance promissory notes.
  • They are easily convertible having face value and maturity.
  • They are also known as Negotiable Certificate of Deposits.

Question 4.
Explain the features and types of Commercial Bills.
Answer:
The features of the Commercial Bills are as follows:

  1. Drawer
  2. Acceptor
  3. Payee
  4. Discounter
  5. Endorser
  6. Assessment
  7. Maturity
  8. Credit Rating

Types:

  1. Demand and Usance Bills: A demand bill is one wherein no specific time of payment is mentioned. So, demand bills are payable immediately when they are presented to the drawee.
  2. Clean Bills and Documentary Bills: Bills that are accompanied by documents of title to goods are called documentary bills. Clean bills are drawn without accompanying any document.
  3. Inland Bills and Foreign Bills: Bills that are drawn and payable in India on a person who is resident in India are called inland bills.
  4. Indigenous Bills: The drawing and acceptance of indigenous bills are governed by native custom or usage of trade.
  5. Accommodation and Supply Bills: Accommodation bills are those which do not arise out of genuine trade of transactions.

Question 5.
What are the characteristics of Government Securities? (SMART IG)
Answer:

  1. Agencies: Government securities are issued by agencies such as Central Government State Governments, semi-government authorities like local Government authorities.
  2. RBI Special Role: RBI takes a special and active role in the purchase and sale of these securities as part of its monetary management exercise.
  3. Nature of Securities: Securities offer a safe avenue of investment through guaranteed payment of interest and repayment of principal by the Government.
  4. Liquidity Profile: The liquidity profile of gilt-edged securities varies. Accordingly, the liquidity profile of securities issued by the Central Government is high.
  5. Tax Rebate: A striking feature of these securities is that they offer a wide range of tax incentives to investors.
  6. Market: As each sale and purchase has to be negotiated separately, the Gilt-Edged Market is an Over-The-Counter Market.
  7. Forms: The securities of Central and State Government take such forms as inscribed stock or stock certificate, promissory note, and bearer bond.
  8. Participants: The participants in the Government securities market include the Government sector comprising Central and State Governments
  9. Trading: Small and less active, banks and corporate holders who purchase and sell Government securities on the stock exchanges participate in trading.
  10. Issue Mechanism: The Public Debt Office (PDO) of the RBI undertakes to issue government securities.
  11. Issue opening: A notification for the issue of the securities is made a few days before the public subscription is open.
  12. Grooming Gradual: It is the acquisition of securities nearing maturity through the stock exchanges by the RBI.
  13. Switching: It is the purchase of one security against the sale of another security carried out by the RBI in the secondary market as part of its open market operations.
  14. Auctioning: A method of trading whereby merchants bid against one another and where the securities are sold to the highest bidder.

12th Commerce Guide Money Market Additional Important Questions and Answers

I. Choose The Correct Answer.

Question 1.
The money market is a market for purely ______
(a) Short-term funds
(b) Long-term funds
(c) Medium-term funds
(d) None of these
Answer:
(a) Short-term funds

Question 2.
Government of different countries is the participants of ……………..
a) Capital Market
b) Money Market
c) Securities Market
d) All of these
Answer :
b) Money Market.


Question 3.
Which is dealt with only those assets which can be converted into cash readily?
(a) Capital market
(b) Money market
(c) Stock exchange
(d) Bank
Answer:
(b) Money market

Question 4.
………………..Bills are governed by native custom or usage of Trade.
a) Accommodation
b) Inland
c) Supply
d) Indigenous
Answer :
d) Indigenous.

Question 6.
Pick the odd one out:
a) Endorser
b) Endorsee
c) Grace days
d) Creditor
Answer :
d) Creditor

Question 6.
The issuers of the certificate of deposits are ______
(i) commercial banks
(ii) cooperative banks
(iii) private company
(iv) financial institutions
(a) (i) and (ii)
(b) (i) and (iii)
(c) (i) and (iv)
(d) (ii) and (iii)
Answer:
(c) (i) and (iv)

II. Match The Following.

Question 1.
Match List I with List II

List-I

List-II
i. Treasure Bill Market 1. Short term Funds
ii. CD Market 2. Long term Funds
iii. Money Market 3. Higher degree of liquidity
iv. Capital Market 4. Issued by Commercial Banks

Answer:
a) (i) 4, (ii) 3, (iii) 1, (iv) 2

Question 2.

List-I

List-II
i. Inland Bills 1. Documents attached
ii. Documentary Bills 2. No documents attached
iii. Clean Bills 3. Drawn in India
iv. Foreign Bills 4. Drawn outside India


Answer:
a) (i) 3, (ii) 1, (iii) 2,(iv) 4.

III. Assertion and Reason.

Question 1.
Assertion (A): Treasury Bills enjoy a higher degree of liquidity since they are issued by Government.
Reason (R): The Government promises to pay the specific amount on the due date
a) (A) is true (R) is False
b) (A) is False (R) is True
c) Both (A) and (R) are False
d) Both (A) and (R) are True
Answer :
d) Both (A) and (R) True

Question 2.
Assertion (A): A demand bill is one wherein no specific time of payment is mentioned.
Reason (R): So, it has to be payable immediately on demand.
a) Both (A) and (R) are correct
b) Both (A) are (R) are incorrect
c) A is correct
d) R is incorrect
Answer :
a) Both (A) and (R) are correct

IV. Very Short Answer Questions.

Question 1.
What is Grooming Gradual?
Answer:
Acquisition of securities nearing maturity through the stock exchanges by the RBI in order to facilitate redemption is described as ‘grooming’.

Question 2.
What is the commercial bill market?
Answer:
It is a market for buying and selling of Commercial Bills (of exchange) is known as “Commercial Bill Market”.

Question 3.
What is Liquidity Profile?
Answer:
The liquidity profile of gilt-edged securities varies. Accordingly, the liquidity profile of securities issued by the Central Government is high.

Question 4.
Explain the two oldest money markets.
Answer:

  • The oldest, most developed, and leading Money Market in the world is the “London Money Market”.
  • The second well-developed and ranked Money Market in the world is the “New York Money Market”.

V. Short Answer Questions.

Question 1.
What are sub-markets?
Answer:
It is not a single homogeneous market. It comprises several sub-markets each specializing in a particular type of financing. E.g, Call Money Market, Acceptance Market, Bill Market.


How to Prepare using Samacheer Kalvi 12th Commerce Chapter 6 Money Market Notes PDF?

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  • Refer TN Board books as well as the books recommended.
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  • Highlight and explain the concepts in details.


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