14-10-2014 (Finance Lecture 5th semester BBA)

Cash & marketable securities Management: Highly liquid reparably sale normally Short term (1 year maturity life after that issuing authorities cancel the security and payback the invested amount).

Marketable securities portfolio:Sections of marketable securities are following.

1)      Ready Cash:highly liquid security that give low rate of interest and high marketability its can be sold any time when investor need to sale it.

2)      Controlled Cash: maximum maturity is 6 months. Investment in that kind of securities for the purpose of that need that have specific time period. Like tax and deveined paid.

3)      Free Cash:it’s the investment of free cash.

Fig at end

 

Types of money market securities:the types are following.

1)      T. Bill (Treasury Bills): Government borrows the amount as investment from peoples. Government Issue on no interest but its issue on discount. Like a Bill have Face value of 100 sales on 90. T. Bill rate (10/90*100 = 11.11) = Risk Free Rate. That short term investment almost 6 months.

2)      Treasury Notes: same to Treasury Bills just its life is 2 to 10 years.

3)      Treasury Bonds: same to Treasury Bills & Treasury Bonds just its life is up to 10 years.

4)      Reciprocity Agreements: Agreements to buy securities (usually Treasury bills) and to resell them at a specified higher price at a later date.

5)      Promissory Notes: types are following

a.       Bankers’ acceptances (BAs): Short-term promissory trade notes for which a bank (by having “accepted” them) promises to pay the holder the face amount at maturity.

b.      Commercial paper:Short-term, unsecured promissory notes, generally issued by large corporations (unsecured corporate IOUs).

6)      Negotiable certificate of deposit (CD): A large-denomination investment in a negotiable time deposit at a commercial bank or savings institution paying a fixed or variable rate of interest for a specified time period.

7)      Money market Preferred Stock: Preferred stock having a dividend rate that is reset at auction every 49 days.

8)      Money Market mutual fund: that fund collected from people’s savings from some organization and that organization invest the money from the behalf of all unit holders.