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Suggested answers November 2018 - Strategic Financial Management

Strategic Financial management SFM November 2018 Suggested answers


7(b)


Advantages of commercial papers:

  1. It is quick and cost effective way of raising working capital.
  2. Best way to the company to take the advantage of short term interest fluctuations in the market
  3. It provides the exit option to the investors to quit the investment
  4. They are cheaper than a bank loan
  5. As commercial papers are required to be rated, good rating reduces the cost of capital for the company
  6. It is unsecured and thus does not create any liens on assets of the company
  7. It has a wide range of maturity
  8. It is exempt from federal SEC and State securities registration requirements.

7 (c)

Pre Conditions of Effective Money Market

A well developed money market 
  • uses a broad range of financial instruments
  • Channelises savings into productive investments
  • Promote financial mobility in the form of inter sectoral flows of funds and
  • Faciliate the implementation of monetary policy by way of open market operations

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