What is Primary Capital Market and How does it Works

Primary market is something in which the government use to issue the bonds, preferred stocks and common stock in order to acquire new capital from the market, government on such bonds also gives incentives in the different shapes which are described as under:

Treasury Bills:

Treasury bills are known for its short term tenure its less than a year or may be only one year, these are the negotiable instruments but they do not bear any kind of interest for their maturity, the benefit of purchasing these treasury bills is that these are purchased at discount prices it is debt for the government entity who need to raise their capital and offer its bills to the general public.

Treasury Notes:

Treasury notes on the other hand as compare to treasury bills the life of treasury notes are high, it is known as long term debt sometimes intermediate term which is usually carried out for the two years to ten years, these treasury notes are also the negotiable instrument but this instrument possess the fixed rate of interest, the holder is paid for its instrument a fixed amount of money.

The interest rate is paid according to the tenure of the treasury notes according to its maturity say for suppose if a person want to get its interest after three years the rate of interest would not be like which is for the ten years they will less the rate of interest after calculation.

Treasury Bonds:

Treasury bonds are also issued by the government and the treasury bond is also a long term debt for the government whose maturity date is after the ten years, the time of duration can be increased up to thirty years for treasury bonds as it is an agreement between the bond holder and the government in which the terms are clearly written that the government will pay its interest semi-annually, these bonds are issued or sold with an auction when the customers who willingly want to get the treasury bonds from the government they use to offer their rate in the competitive bid.

Now the competitive bid is something which is sealed by the customers and in which the rate to charge that particular bond is written down that the such rate is bidder going to accept for its bonds, the bonds are issued to only those persons who gives a non-competitive bids you can say the lower rate.

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