1

Money Market
Prepared by jannatul nayma Dipu

1) What do you mean by money market?

 Money markets are the markets where debt securities with maturity of one year or less are
traded.
2) Point out different money market participants?
 Government treasury department
 Central bank/Bangladesh bank
 Commercial bank
 Business
 Investment and securities firms
--investment companies
--finance companies
--insurance companies
--pesion funds
 Individuals
3) What is Bangladesh bank/central bank?
 The BB is the treasury’s agent for distribution of all govt. securities.
4) Who is purchase the treasury securities?
 Bangladesh bank purchase the treasury securities.
5) What do you mean by commercial banks?
 CB holds a large percentage of govt. securities than any other group of financial institutions.
6) What are the major issue of commercial bank?
 Commercial banks are also the major issuer of negotiable certificate of deposit, banker
acceptances, repurchase agreements etc.
7) What are the money market instruments??
Ans: Treasury bills, commercial paper, Banker’s acceptance, Certificate of deposit , Repurchase
argument , Federal fund / central bank fund.
8) What do you mean by Treasury bills?
Ans : Tb are issued by the treasury department and backed by the full faith and credit of govt..
9) Point out the types of treasury securities?
Ans: 3 types a) Bills b)notes c) bonds.
10) What do you mean by commercial paper?
Ans : commercial paper is short term unsecured promontory notes in the open market as an
obligation of the issuing entity.
 2

11) What is the maturity of commercial papers?

Ans : The maturity of commercial paper is generally less than 270 days but lost commercial paper
ranges from 30-50 days.

12) What are the issuers of commercial paper?

Ans: 1) Financial finance companies: capital finance companies, bank holding companies,
independent companies .2) Non financial companies 3) municipalities.
13) The yield on commercial paper is calculated as follow: (Ycp)=sp-pp/pp *360/t .
14) Why commercial paper rate is higher than that on T- bill?
Ans: 3 reason: Credit risk, Tax treatment, less liquid.
15) Define banker’s acceptance?
Ans: A banker acceptance is a vehicle created to facilitate commercial trade transactions.
16) Define certificate of deposit?
Ans: A certificate of deposit is a certificate issued by a bank or thrift that indicates a specified some
of money has been deposited at the issuing depository institution.
17) Define repurchase argument?
Ans : A repurchase argument is the sale of a security with a commitment by the seller to buy-the
security back from the purchaser at a specified price at a designated future date.
18) Point out types of repo?
Ans : overnight repo , term repo .
19) What are the factors determining the repo rate?
Ans: Credit quality & liquidity , term of the repo , Delivery requirement , availability of collateral.
20) What do you mean by federal funds?
Ans: Federal funds are overnight borrowings between banks and other entities to maintain their bank
reserves with central bank.
21) What do you mean by pension funds ?
Ans : pension funds are the retirement plants funded by the corporation or govt.. ageneses for their
workers.
22) Point out the quotes in t-bills?
Ans : Bid rates of t-bills, offer/ bid rate of t-bills.
23) Annualized yield from investing in t-bill(yt) Yt=sp – pp /pp*365/n
Sp = selling price of the investor, pp= purchasing price of the investor, n= no of days remaining to
maturity.
24) What is asset backed commercial paper?
Ans: it is smaller and less well known companies with low credit rating issue commercial paper by
collateralizing high quality asset is called asset backed commercial paper.
 3

25) What do you mean by credit supported commercial paper ?

Ans: it is smaller and less well known companies with low credit rating issue commercial paper by
means of credit support from a firm with high credit rating is called the credit support commercial
paper.
26) Formula of repo rate: dollar interest =dollar principal*repo rate*repo term/360days.

Capital Market

Prepared by Moni dhar

1) What is capital market?

 Capital market is the part of financial market. Financial instruments are transacted in the market.
2) Some features of capital market
 Users – i) Business firms
ii) The mass people
iii) Government
iv) Foreign borrowers
 Instruments
 Duration of instruments
 Confinement of area
 Types of transaction
 Place of transaction
3) What are the functions of capital market?
 Capital information
 Transaction
 Underwriting
 Lending
 Development
 Industrialization
4) What is underwriting?
 Underwriting is the process by which investment bankers raise investment capital from
investors on behalf of corporations and governments that are issuing either equity or debt
securities.
5) Point out the participants in capital market.
 Loan providers
 Loan takers
 4

 Financial intermediaries
 Service organizations
 Regulatory organizations
6) What is financial intermediaries?
 Financial intermediaries are media between loan providers and takers.
7) Who are the financial intermediaries?
 Insurance organizations
 Pension funds
 Commercial banks
 Financing companies
 Savings organizations
 Dealers
 Brokers
 Jobbers
 Non profit organization
8) What is clearing house?
 Clearing house is the factor of capital market which resolves the dues among various
financial institutions.
9) What is underwriter?
 The firms or individuals taking the responsibility of selling shares, debentures, bonds etc. are
called underwriter.
10) What is stock exchange?
 Stock exchange is an organization and specific location where buyers and sellers sell and buy
shares and bonds of public limited company.
11) What types of transaction are held in CM?
 Direct transaction
 Open market transaction
12) What is direct transaction?
 When a savings or loan giving society grants a loan for a client it is called direct transaction.
13) What is open market transaction?
 Where market stocks, bonds, debentures, securities etc. are transacted it is called open market
transaction
14) What is broker?
 Person who serves as a trusted agent or intermediary in commercial negotiations or
transactions.
 5

15) What are the objectives of stock exchange?

 To supply capital
 To inspire savings
 To develop economy
 To do long term financing
 To trade financial instruments
 To raise awareness
 Convenience
16) What are the causes of price fluctuation in stock exchange?
 Demand and supply
 Financial condition of the firm
 Bank rate
 Rate of dividend
 Credit policy of the central bank
 Balance of trade
 Inflation and deflation
 National income and savings
 Political condition
17) What is call money?
 Cash that a bank has loaned to a broker for a call loan
18) What is balance of trade?
 The BOT is the difference between a country’s imports and its exports for a given time
period.
19) What is bank rate?
 Interest rate at which a central bank will advance short term loans to commercial banks.
20) What is broker house?
 Broker house helps in trading financial instruments among the investors and corporate
organization.
21) Capital market is controlled by Bangladesh securities and exchange commission.
22) Financial instruments in the capital market have maturities of more than one year.
23) There are two stock exchanges in Bangladesh
a) Dhaka stock exchange
b) Chittagong stock exchange
24) Securities and exchange commission is the regulatory authority of stock exchange in Bangladesh.
25) The main objective of SEC is to protect the investors.
 6

Margin Trading
Prepared by- Liza chowdhury

1) What is Margin Trading?

 Trading on margin refers to the practice of purchasing stocks with borrowed funds.
2) What is Margin Account ?
 A margin account is an account maintain by an investor with a brokerage firm in which
securities in which securities may be purchase by borrowing a portion of the purchase price
from the brokerage firm.
3) What the broker charges in Margin Account?
 The broker charges interest on his loan that is that is related to the current money market
interest rate.
4) Debit balance happened when?
 When the sum of the figures on debit side exceeds the sum of those in credit side.
5) Debit balance means?
 A debit balance means that the customer is in debt to the broker.
6) Credit balance happened when?
 When the sum of the figures of credit side exceeds the sum of the figures on debit side.
7) Credit balance means?
 A credit balance means that the broker is in debt to the customer.
8) Why customers use a margin account?
 Customers use a margin account as a means of purchasing shares on a installment basis.
9) What is initial margin?
 The amount which is required to deposit to the broker to purchase security on margin is
called initial margin.
10) What is dollar margin?
 The excess value of collateral over the customer debt is the dollar margin or equity.
11) What is percentage margin?
 The ratio of the dollar margin to the market value of collateral is called percentage margin.
12) Initial percentage margin =?
 Initial percentage margin=
13) What is maintenance margin?
 The minimum level by which the investors equity position may be fall as a result of
unfavorable price movement. Charge before the investors is required to deposit additional
margin.
14) Maintenance Margin =?
 7

 Maintenance margin =
15) What is call margin?
 In order to maintain an account, the paying of additional amount is called the call margin.
16) What is the difference between maintenance and call margin?

Maintenance Margin Call Margin
A minimum level of amount is always To maintain an account the paying of
kept in order to maintain the account. additional amount is call margin.
17) What is marking to Market?
 The procedure of paying maintenance margin is called the marking to market.
18) Rate of Return =?
 Rate of return =
19) What is the advantage of having margin account?
 Having a margin account eliminates the necessity of making payment for each purchase and
receiving payment for each rule.

Equity/Stock Market
prepared by-Anik bhowmik

 What is equity/ What is stock…?

Ans: A stock on any other security representing an owner ship interest is called equity. (main answer)
o On balance sheet the amount of funds contributed by owner.
o Equity more commonly known as stock.
 What is equity market…?
Ans: The equity market (often referred to as the stock market) is the market for trading equity instrument.
An example: common stock share

 Types of stock…?
 Ans: There are two types of stock
o Common Stock
o Preferred Stock
 What is Common Stock…?
Ans: Common Stock is a security that represent owner ship in a corporation.

 What is Preferred Stock…?

Ans: A preferred stock is a class of ownership in corporation that has higher claim on its assets and earnings
ten common stock.

 What is Stock market…?

Ans: A stock market is a market where people can go to buy and sell shares of companies.
 8

 What is stock exchange…?

Ans: A stock market is a super market for the buying and selling of Stocks and shares.

 What is Share…?
Ans: A share is a single unit of ownership of a company.

 Why do companies issue share…?

Ans: Companies issues share to the public in exchange for cash.

 Who allows companies to issues share…?

Ans: Stock Exchange. Example- Chittagong stock exchange (CSE), Dhaka Stock Exchange (DSE).

 Why do people buy share…?

Ans: People buy share to make money by receiving dividend.

 What are dividends….?

Ans: A sum of money paid regularly by a company to its share holder out of its profit.

 What is Primary Market…?

Ans: It is the market for the newly issued security. It is a market where the seller of the security is the issuer
of the security.

 What is public offering…?

Ans: Public offering referrers the selling of security in public market.

 What is private placement….?

Ans: Private placement referrers to the selling of security directly to the insurance companies pensions
funds and individual without through the security market.

 What is initial public offering…?

Ans: It is the first public equity issue made by a firm as it goes to private ownership to public ownership.

 What is general cash…?

Ans: General cash offer the sell of new securities to all interested investors.

 What is privileged subscription or rights offering…?

Ans: Instead of selling security to all interested investors a company gives its existing shareholder the right
of first refusal.

 Who is the investment bankers…?

Ans: The invest bankers is the link between the corporation in need of funds and the investment.

 What is the advisory function…?

Ans: The action where investment bankers provides advice during the planning stage. (A function of
investment banker)
 9

 What is the underwriting function...?

Ans: In this section the invest bankers takes the responsibility to sale security and also take the risk of
issuer.( A function of investment banker).

 What is agency Function…?

Ans: In this section the investment banker works as an agent of all issuer. (A function of investment
banker).

 What is market maker…?

Ans: In this section investment banker ensure a liquid market by engaging in buying and selling security in
market.

FINANCIAL STRUCTURE OF BANGLADESH

prepared by- towhidul islam

1. What do you mean by financial structure?

Ans: It refers to the specific mixture of long term debt and equity that a company uses to finance it's
operation.
2. Who are the controller of Bangladesh financial system?
Ans: Ministry of finance, Bangladesh Bank and SEC ( Security Exchange Commission of Bangladesh).
They also formulate policy & guidelines.
3. How can you categorize the financial system of Bangladesh?
Ans: Under 3 boards heading,
A. Financial institution
B. Financial instruments
C. Financial markets.
4. What do you mean by financial institution?
Ans: Any organizations such as bank or finance house that collect funds from individuals or other
organizations is investing these funds or lend them in on to borrowers.
5. How many parts of financial institution?
Ans: Two types,
1. Banking financial institution
2. Non banking financial institution.
6. What do you mean by banking financial institution?
Ans: Institution that mainly concerned with making and receiving payments on behalf of their customers,
accepting deposits and making loan to private individuals such as - Sonali bank,Rupali Bank.
7. Any types of Banking financial institution?
Ans: Yes,it has two types -
i) Scheduled bank - Which banks are enlisted in the book of Bangladesh Bank - Janata Bank, Standard Bank.
8. Scheduled bank can be divided into two parts-
 10

i) Local bank- Origin of there banks in our country - Exim Bank, Bank Asia.
ii)Foreign bank - Origin of these banks of their respective countries but operating in Bangladesh through
their branch network. Standard Chartered Bank.
9. Local Banks are two types -
i) Commercial Bank - The main objective of these banks is profit making - Agrani Bank.
i) Spealalized Banks - Establish to the objectives to develop cortain sectors of our economy - Bangladesh
Krishi Bank.
10. Commercial Bank are two types -
i) Nationalized Commercial Bank - Whose control and ownership is in the hand of government. There are
four nationalized Commercial Bank.
Sonali Bank,Agrani Bank,Rupali Bank,Janata Bank.
ii) private Commercial Bank - The ownership and control of these banks are in the hand private individuals -
City Bank.

11. Non Bank financial institution -

Which institutions are not allowed to take deposit from public. Types -
i) Insurance companies - ALICO
ii) Investment Company - Investments Corporation of Bangladesh.
12.What do you mean by financial instruments?
Ans: Financial instruments are assets that can be traded.
13. Types of financial instruments--
i) Money market instruments- which securities can be traded with in the years - T.Bill, C.paper etc.
ii) Capital market instruments- Securities that's needed more than 1 year to trade are capital market
instruments - Debenture, Common Stock, Pree fered stock.
14. What do you mean by financial markets?
Ans: It is the market where financial assets are traded. It has two types of markets.
i) Security market - Where securities can be bought and sold on the base of supply and demand.
ii) Non- Security market - It is the market where securities of financial institutions are traded.
15. Types of security market -
i) Primary market - It is the market where new securities are purchased and sold for the first time.
ii) Secondary market - It is the market where existing securities are traded.
16. Can financial asset holders can convert their securities into cash? It yes, then where?
Ans: Yes, they can. Secondary market allows them to convert their securities into cash.
17. Can you describe the types of Secondary Market?
Ans: Yes, Secondary market can be divided into four types-
 11

a) Organized exchange - Here listed securities are traded. It has a physical existence for trading securities -
DSE,CSE
b) Over the counter market - Here unlisted securities are traded by brokers. It has no physical trading
facility.
c) Third market - Trading of listed securities in the OTC (Over the counter) market.
d) Fourth market - It is the market where securities are traded without the help of brokers & dealers.