Question 10.3: What are the principal money market and capital market instr...

Banks purchase a wide range of investment securities. The principal money market instruments available to banks today are Treasury bills, federal agency securities, CD’s issued by other depository institutions, Eurodollar deposits, bankers’ acceptances, commercial paper, and short-term municipal obligations. The common characteristics of most these instruments is their safety and high marketability. Capital market instruments available to banks include Treasury notes and bonds, municipal notes and bonds, and corporate notes and bonds. The characteristics of these securities is their long run income potential.