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Money Market - 3 Video Lecture | Commerce & Accountancy Optional Notes for UPSC

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FAQs on Money Market - 3 Video Lecture - Commerce & Accountancy Optional Notes for UPSC

1. What is a money market?
Ans. A money market is a financial market where short-term borrowing and lending of securities with maturities of one year or less take place. It includes instruments such as Treasury bills, commercial paper, and certificates of deposit.
2. How does the money market work?
Ans. In the money market, financial institutions and corporations borrow and lend money for short periods to meet their short-term liquidity needs. The interest rates in the money market are determined by supply and demand for funds.
3. What are the benefits of investing in the money market?
Ans. Investing in the money market provides investors with safety, liquidity, and competitive returns compared to traditional savings accounts. It also offers diversification and a low correlation with other asset classes.
4. What are the risks associated with money market investments?
Ans. Although money market investments are considered relatively safe, there are still risks involved such as interest rate risk, credit risk, and liquidity risk. It is essential for investors to carefully assess these risks before investing.
5. How can individuals invest in the money market?
Ans. Individuals can invest in the money market through money market mutual funds, Treasury bills, commercial paper, and certificates of deposit. It is recommended to consult with a financial advisor to determine the best investment options based on individual financial goals and risk tolerance.
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