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MARKETABLE SECURITIES

Types of marketable securities

4. Bill of Exchange –

A bill of exchange is a written order once used primarily in
international trade that binds one party to pay a fixed sum of money
to another party on demand or at a predetermined date. Bills of
exchange are similar to checks and promissory notes—they can be
drawn by individuals or banks and are generally transferable by
endorsements. A bill of exchange transaction can involve up to three
parties. The drawee is the party that pays the sum specified by the
bill of exchange. The payee is the one who receives that sum. The
drawer is the party that obliges the drawee to pay the payee. The
drawer and the payee are the same entity unless the drawer
transfers the bill of exchange to a third-party payee.

5. Negotiable Instrument of Deposit (NID) :

also known as Negotiable Certificate of Deposit (NCD) are deposit
certificates used in the wholesale money market that are regularly
purchased and traded by institutional investors and high-net-worth
individuals in the stock market. A negotiable CD is one that can be
bought and sold on a secondary market. The bank that issues the
original certificate sets the face amount and interest to be paid. In

general, the longer the term, the higher the interest rate. Negotiable
CDs mature over relatively short periods, from two weeks up to a
year. At maturity, the holder of the CD receives the face amount from
the issuer and the CD expires. If the bank restricts the DPB50113
BUSINESS FINANCE | fiedahusain CD so that it can't be transferred
by the holder, and sets a penalty for the return of principal before
maturity, then the CD is non-negotiable.