What type of trading occurs in the money market?

What type of trading occurs in the money market?

• A. Long-term loans exceeding one year
• B. Trading of stocks and shares
• C. Short-term loans, generally under one year
• D. Exchange of commodities and derivatives

Answer: (C)

The money market primarily facilitates the trading of short-term loans and financial instruments, which typically have maturities of under one year. This includes various instruments such as Treasury bills, commercial paper, and certificates of deposit. The essence of the money market is to provide a space for short-term borrowing and lending, allowing participants to manage their liquidity needs effectively. By focusing on short-term loans, the money market serves different entities, including governments, financial institutions, and corporations, allowing them to meet immediate funding requirements and manage cash flow. Transactions here are characterized by low risk and are generally secured through collateral, which is vital for maintaining stability and ensuring liquidity in the financial system. In contrast, options like long-term loans exceeding one year, trading of stocks and shares, and the exchange of commodities and derivatives pertain to different segments of the financial markets, such as the capital market and commodity market, where the risks and durations differ significantly from those in the money market.

The money market primarily facilitates the trading of short-term loans and financial instruments, which typically have maturities of under one year. This includes various instruments such as Treasury bills, commercial paper, and certificates of deposit. The essence of the money market is to provide a space for short-term borrowing and lending, allowing participants to manage their liquidity needs effectively.

By focusing on short-term loans, the money market serves different entities, including governments, financial institutions, and corporations, allowing them to meet immediate funding requirements and manage cash flow. Transactions here are characterized by low risk and are generally secured through collateral, which is vital for maintaining stability and ensuring liquidity in the financial system.

In contrast, options like long-term loans exceeding one year, trading of stocks and shares, and the exchange of commodities and derivatives pertain to different segments of the financial markets, such as the capital market and commodity market, where the risks and durations differ significantly from those in the money market.