Explanation
TYPES OF MONEY MARKET INSTRUMENTS:
(i) Offer Through Prospectus: This involves inviting subscription from the public through issue of prospectus.
(ii) Offer for Sale: Under this method securities are not issued directly to the public but offered for sale through intermediaries like issuing houses or stock brokers.
(iii) Private Placement: Private placement is the allotment of securities by a company to institutional investors and some selected individuals.
(iv) Rights Issue: This is a privilege given to existing shareholders to subscribe to a new issue of shares according to the terms and conditions of the company.
(v) e-IPOs: A company proposing to issue capital to the public through the online system of the stock exchange has to enter into an agreement with the stock exchange.
An ideal capital market is defined by a set of five assumptions.
1: Capital markets are friction-less.
2: All market participants share homogenous expectation, valuerelevant information is costlessly available to all market participants.
3: All market participants are atomistic. No single market participant can affect the market price of a security via trades.
4: The firms investment program is fixed and known.
5: The firms financing is fixed. Once chosen, the firms capital structure is fixed.
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