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Interpretation:

Commercial Paper:

Commercial paper is an unsecured promissory note with a fixed maturity of no more than 270

days. Commercial paper is a money-market security issued (sold) by large corporations to get

money to meet short term debt obligations.

d!antage of commercial paper"

• #igh credit ratings fetch a lower cost of capital.

• $ide range of maturity pro!ide more flexibility.

• %t does not create any lien on asset of the company.

&isad!antages of commercial paper"

• %ts usage is limited to only blue chip companies.

• %ssuances of commercial paper bring down the bank credit limits.

• high degree of control is exercised on issue of Commercial 'aper.

Corporations sell commercial paper typically maturing in 270 days or less to fund e!eryday

acti!ities such as rent and salaries. Commercial 'aper is exempt from *C registration if its

maturity does not exceed 270 days.

%ndustrial Companies use commercial paper to finance working capital to fund operating

expenses and occasionally to finance on temporary basis construction pro+ects. ,rom the data

which a!ailable on website of ,ederal eser!e the interest rate on commercial papers for

financial and non-financial fluctuates. ometimes interest rates on non-financial are high than

financial and next day it is less than financial. ostly interest rates are declared by central bank

when it announces monetary policy. %t has been seen that interest rate on non-financial

commercial paper is low as compared to financial commercial paper when o!erall is compared

 because the maximum interest rate on non financial commercial paper is / and on financial

commercial paper is 1.%nterest rate on financial commercial paper crossed / many times. o

it can be said that interest rate on financial commercial paper is high than non financial

commercial paper.

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Q No 0: Compare the:

a! "ail#

$! Wee%l#

• &'rodollar "eposits

• (-)ills *+econdar# ,ar%et!

• C"s

)*+,D,A+D)(,SI. Dail/

1 Month 3 Month Month

Se 1 %013 02%% 02% 024%

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)u"o Dolla"Deosit5ee$l/

  1Month

  3Month

  Month

9-Se 02%% 02% 024%

10-Se 02%% 02% 024%

11-Se 02%% 02% 024%

1%-Se

 

02%% 02% 024%

13-Se 02%% 02% 024%

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Interpretation:

3oday the *urodollar market is the international capital market of the world.

*urodollars are time deposits denominated in 4.. dollars at banks outside the 4nited tates.

%n 1//7 nearly /0 of all international loans were made this way.

5anks accepting *urodollar deposits use the dollars to make two sorts of in!estments. loans and

inter$an% placements.

*uro &ollar is more li6uid and less risky than other instruments. 3he demand for the *urodollar

increase day by day people use to deposit their in!estment through the shape of *urodollar thats

why it is used for loaning for the %nternational countries.

3he funds that form the basis for the *urodollar market are pro!ided by a wide range of

depositors" large corporations (domestic foreign multinational) central banks and other

go!ernment bodies supranational institutions such as the 5ank for %nternational ettlements and

wealthy indi!iduals.

(-)ills

"ail#

  1

,onth

 

,onth

 

,onth

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1-+ep 002 002 003

(-)ills

Wee%l#

  1

,onth

 

,onth

 

,onth4-+ep 00 00 002

10-+ep 001 00 002

11-+ep 001 00 005

1-+ep 001 001 00

1-+ep 001 001 00

12-+ep 001 00 00

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Q No 0: Ne6 +ec'rit# Iss'es. 7+ Corporation:

a! )onds

$! +hares

2010 2011 2012 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13

893,717 909,109 1,242,453 87,989 129,801 113,286 106,530 109,043 122,500 63,110 93,718

Interpretation:

)ond:

$ond is an instrument of indebtedness of the bond issuer to the holders. ;ery often the bond is

negotiable i.e. the ownership of the instrument can be transferred in the secondary market.

5onds are issued by public authorities credit institutions companies and supranational 

institutions in the primary markets.

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t the time of issue of the bond the interest rate and other conditions of the bond will ha!e been

influenced by a !ariety of factors such as current market interest rates the length of the term and

the creditworthiness of the issuer. 3hese factors are likely to change o!er time so the market

 price of a bond will !ary after it is issued.

5onds are bought and traded mostly by institutions like central banks so!ereign wealth funds pension funds insurance companies hedge funds and banks. %nsurance companies and pension

funds ha!e liabilities which essentially include fixed amounts payable on predetermined dates.

3hey buy the bonds to match their liabilities and may be compelled by law to do this. ost

indi!iduals who want to own bonds do so through bond funds.

2010 2011 2012 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13

131,135 129,489 158,933 12,228 17,005 14,134 17,361 17,000 21,675 13,371 12,238

Interpretation:

+hares:

corporation di!ides its capital into shares which are offered for sale to raise capital termed as

issuing shares. 3hus a share is an indi!isible unit of capital expressing the contractual

relationship between the company and the shareholder.

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hares are !alued according to !arious principles in different markets but a basic premise is that

a share is worth the price at which a transaction would be likely to occur were the shares to be

sold. 3he li6uidity of markets is a ma+or consideration as to whether a share is able to be sold at

any gi!en time.

3he shares also help the respecti!e holders to be able to lay claim to a part of the worth of thespecific company. 3his is applicable howe!er only when there is li6uidation.

$hile shares are often used to refer to the stock of a corporation shares can also represent

ownership of other classes of financial assets such as mutual funds.