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Bank acceptances are one of the oldest forms of credit. They can be traced back to the 4^th century BC. They serve as a bill of exchange by a business that has borrowed money, whereby the business promises to pay out a given sum after a given period. This bill of exchange is then accepted by the bank which then guarantees the payment upon maturation. To date, bank acceptances are one of the most traded securities on the money market.

Investments on the money market

As an investor, you can invest in money market investments or capital market investments. What you choose to invest in will depend on your investment objectives and criteria. Should you be interested in the money market, you have several financial assets to choose from including bank acceptances. Other options are treasury bills, negotiable certificates of deposit, participation bonds, project bills, deposits, trade bills and money market funds.

Bank acceptances as financial assets

Bank acceptances are issued by banks, who serve as the primary market. The holders of the bank acceptances may be individual investors, pension funds, insurance companies and various institutions. The holder is the person or institution who is entitled to a stated amount of money on a stated date.

There is an active secondary market for bank acceptances. This enables holders or investors to sell high quality bank acceptances on the market at any time they wish to. The possibility exists that the investor may lose out though as the returns to be delivered over the short term may likely be lower than they would be over the longer term. There is also the possibility that the rate of return has fallen.

It is worth speaking to a financial broker about your financial objectives or questions if you are new to investing on the money market.

Tags: Finances, money