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Money Market - 2 Video Lecture | Commerce & Accountancy Optional Notes for UPSC

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FAQs on Money Market - 2 Video Lecture - Commerce & Accountancy Optional Notes for UPSC

1. What is a money market?
Ans. A money market is a market where short-term financial instruments such as Treasury bills, commercial paper, certificates of deposit, and short-term government bonds are traded. It is a place where individuals and institutions can lend and borrow money for short periods of time.
2. How does the money market differ from the stock market?
Ans. The money market deals with short-term debt securities, while the stock market deals with long-term equity investments. Money market instruments have lower risk and lower returns compared to stocks, which are more volatile and offer the potential for higher returns.
3. What are the benefits of investing in the money market?
Ans. Investing in the money market can provide liquidity, safety, and a relatively stable return on investment. It is a good option for investors looking for low-risk options to park their funds in the short term.
4. How are interest rates determined in the money market?
Ans. Interest rates in the money market are influenced by factors such as the supply and demand for money, economic conditions, inflation expectations, and central bank policies. As interest rates rise, the returns on money market investments also increase.
5. What are the risks associated with investing in the money market?
Ans. While the money market is generally considered low risk, there are still risks such as interest rate risk, credit risk, and liquidity risk. Investors should carefully assess these risks before investing in money market instruments.
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