(A) 1. Cash ties up business funds just as investments in inventory or plants and equipment do. Unused or idle cash earns no money so financial managers try to minimize the amount of cash kept on hand to pay bills. Most businesses invest any cash not needed for such transactions in marketable securities or use it to reduce debt.

2. A bond is a debt security, similar to an I.O.U. When you purchase a bond, you are lending money to a government, municipality, corporation, federal agency or other entity known as an issuer.* In return for that money, the issuer provides you with a bond in which it promises to pay a specified rate of interest during the life of the bond and to repay the face value of the bond (the principal) when it matures, or comes due. Bonds can be also called bills, notes, debt securities, or debt obligations.

Unsecured bond: A bond that is not secured by collateral.

Secured bond: A bond that is backed by collateral. This collateral must be forfeited in the event that the issuing firm defaults.

Serial Bonds: Are different from secured bonds they are actually a sequence of small bond issues of progressively longer maturity. The firm pays off each of the serial bonds as they mature.

Floating-rate bond: A bond whose interest rate is adjusted periodically, this is done according to the current interest rates. They do not have fixed interest payments.

Junk bond: Are a high interest rate bond. They are offered to companies with lower credit ratings. Due to the increased risk of default, they are typically issued at a higher yield than more creditworthy bonds.

3. Securities Markets is a place where buyers and sellers of securities can enter into transactions to purchase and sell shares, bonds, debentures etc. Further, it performs an important role of enabling corporates, entrepreneurs to raise resources for their companies and business ventures through public issues. Transfer of resources from those having idle resources (investors) to others who have a need for them (corporates) is most efficiently achieved through the securities market. Stated formally, securities markets provide channels for reallocation of savings to investments and entrepreneurship. Savings are linked to investments by a variety of