Which of the following is (are not characteristic of a money market instrument)

Definition of Financial Stability

Financial stability can be defined as “a condition in which the financial system is not unstable". It can also mean a condition in which the three components of the financial system -- financial institutions, financial markets and financial infrastructure -- are stable.

• ‘Stability of financial institutions’ refers to a condition in which individual financial institutions are sound enough to carry out their financial intermediation function adequately, without assistance from external institutions including the government.
• ‘Stability of financial markets’ means a condition in which there is no major disruption of market transactions, with no significant deviation of financial asset prices from economic fundamentals, thereby enabling economic agents to raise and operate funds with confidence.
• ‘Stability of financial infrastructure’ refers to a condition in which the financial system is well structured to ensure smooth operation of market discipline, and both the financial safety net and the payment and settlement system are running effectively.

Financial stability can be more broadly defined as “a condition in which the financial system can facilitate real economic activities smoothly and is capable of unravelling financial imbalances arising from shocks.”

Why is Financial Stability Important?

Financial stability is an essential requirement not only for price stability, the policy goal of the central bank, but also for healthy development of the economy. This is because financial instability entails heavy costs for an economy, since the volatility of price variables in the financial markets increases and financial institutions or corporations may go bankrupt. In addition, economic development can be limited at such a time, since economic agents find it difficult to make rational decisions and the efficiency of resource allocation is reduced.

Since the 1980s, many countries around the world have achieved the positive effects of rapid financial industry growth owing to the progress of financial liberalization. At the same time, however, they have also experienced periods of dramatic slowdown in economic growth, due to heavy economic expenses arising from financial instability or financial crises.

Against this backdrop, many countries have started to place great emphasis on financial stability when implementing their policies. Attention paid to financial stability is growing, as new factors with the potential to generate financial instability, including the strengthening of financial sector links among countries and the rampant development of complex financial instruments, have recently emerged.

Money market instruments are used by corporations, governments, and individual investors seeking short-term funding or short-term places to invest money. There are several different varieties of money market instruments, but all have a few things in common.

What is the money market?
There are two types of financial markets. The "capital markets," which consist of stocks and bonds, allow institutions to raise capital for long-term purposes, which is generally defined as more than one year. For example, a company may issue bonds in order to acquire another business, and will set the maturity date of those bonds for 10 years in the future.

On the other hand, the "money market" is for funding over short time periods of one year or less. Instead of obtaining funding for operating expenses or capital investment as they would with the capital markets, the money markets are often used to fund immediate operating expenses or to provide working capital.

From an investor's point of view, the money market provides a safe place to invest without losing ready access to one's money. For example, an investor who needs liquidity and has little risk tolerance may put some of their money into Treasury bills.

Types of money market instruments
There are several different varieties of money market instruments, issued by both companies and governments. This isn't an exhaustive list, but some of the more common types of money market instruments include:

• Short-term CDs
• Bankers acceptances
• Treasury bills
• Commercial paper
• Municipal notes
• Federal funds
• Repurchase agreements (repos)

Characteristics
Money market instruments have a few things in common. For starters, we already mentioned that they have short maturities, defined as one year or less. So, a six-month CD would qualify as a money market instrument, but a two-year CD would not. Money market instruments' maturities can last from one day to one year, with three months or less being the most common.

In addition, money market instruments generally have the following two characteristics:

• Liquidity -- Money market instruments are liquid investments, which means that they can readily be bought and sold for stable prices. There are active secondary markets for most money market instruments, so they can be easily sold before maturity.
• Safety -- Because of their liquidity and the nature of the lenders, money market instruments are safer than many other types. For example, Treasury bills are backed by the credit of the U.S. government. Money market deposit accounts are federally insured for up to $250,000. However, it's important to mention that low-risk and risk-free are two different things. Some types of money market instruments do have some risk. Commercial paper, for instance, is only as safe as the company that issued it.

To sum it up, money market instruments are seen as a safe place to put money because of their high liquidity, short maturities, and safety relative to other types of investments.

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Which is not characteristic of a money market instruments?

Which of the following is a characteristic of money market instrument?

Which one of the following is not a characteristic of money market *?

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