Financial Management

Repurchase Options (Repo.) and Ready Forward contracts

These are purchase and repurchase agreements used by money market participants to finance their loans. Such transaction when viewed from the point of view of the supplier of funds, is called Reverse Repo. Similarly, when viewed from the point of view of seller of securities (the party acquiring funds), it's called Repo. To understand better, let's take an example of traditional lending activity. Mr. A borrowed ₹50,000 from Mr. B for 2 months @ 12% p.a. interest, by giving his golden watch as security. Here, if Mr. A doesn't return the money in 2 months, Mr. B can sell his
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What is Money Market

Participants of Market-min
Financial system of any country consists on different sub-markets as money, capital and forex markets. The flow of funds in these markets is multi-directional depending upon liquidity, risk profile, yield pattern, interest rate differential or arbitrage opportunities, regulatory restrictions, etc. The role of money market in the overall financial system is prime in as much as the market acts as an equilibrating mechanism for evening out short term surpluses and deficits and provides a focal point for Central Bank's intervention to bring out variations in liquidity profile in the economy. It is short-term market meant to meet short term financial
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Money Market Mutual Funds & Exchange Traded Funds

In 1992, GOI thought to introduce Money Market Mutual Funds (MMMFs) on Indian Financial Canvass. The aim of the Government was to develop the money market and to enable individual investors to gain from money market instruments since it is practically impossible for individuals to invest in instruments like Commercial Papers (CPs), Certificate of deposits (CDs) and Treasury Bills (TBs) which require huge investments. The broad framework of guidelines in respect of MMMFs issued by RBI are as follows: The investment by individuals and other bodies would be in the form of negotiable and transferable instruments and MMMF deposit accounts.
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Computation of returns from Mutual Funds

Mutual Fund Computations-min
are funds wherein investor invests money and owns part of assets owned by mutual fund that corresponds to his/her share in the fund. Besides return on buying and selling of the Mutual Fund units hold by investor, an investor derives three types of income from owning such mutual fund units. Cash Dividend Capital Gains Disbursements Change in the fund's Net Asset Value (NAV) per unit (Unrealised Capital Gains) For an investor who holds a mutual fund for say 1 year, the one-year holding period return is given by Return = Dividend + Realised Capital Gains + Unrealised Capital Gains/Base Net
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