ECON305, Maclachlan, Fall 2006 Some Distinctions Primary vs. secondary markets. Exchanges vs. over-the-counter markets. Money vs. capital markets. Brokers vs. dealers. Eurocurrencies vs. Eurobonds.
ECON305, Maclachlan, Fall 2006 Money market instruments Less than a year in maturity. Low risk. High denomination. Examples: Treasury bills, commercial paper, bankers acceptances, repurchase agreements.
ECON305, Maclachlan, Fall 2006 Debt Fixed cash flows (interest). Principal to be repaid. Default leads to bankruptcy. Equity Cash flows tied to profits (dividends). No principal to be repaid. Investors are residual claimants.