Question 1

A 50-day maturity money market security has a bond equivalent yield of 3.60 percent. The security's EAR is

Accepted Answer

A)  3.69 percent.
B)  3.61 percent.
C)  3.55 percent
D)  3.87 percent.
E)  3.66 percent.

Question 2

How does a repo differ from a Fed funds transaction?
 How do their rates compare?

Accepted Answer

A repo is basically a collateralized loa...

Question 3

A banker's acceptance is

Accepted Answer

A)  a time draft drawn on the exporter's bank.
B)  a method to help importers evaluate the creditworthiness of exporters.
C)  a liability of the importer and the importer's bank.
D)  an add-on instrument.
E)  for greater than one year maturity.

Question 4

For the purposes for which they are used,money market securities should have which of the following characteristics?
I. Low trading costs
II. Little price risk
III. High rate of return
IV. Life greater than one year

Accepted Answer

A)  I and III
B)  II and IV
C)  III and IV
D)  I and II
E)  I,II,and III

Question 5

Commercial paper,Treasury bills,and banker's acceptance rates are all quoted as discount yields.

Accepted Answer

A) True 
 B)False

Question 6

In the T-bill auction process,the competitive bidder is guaranteed a ______________ and a noncompetitive bidder is guaranteed a _______________.

Accepted Answer

A)  minimum price; maximum price
B)  maximum price; minimum price
C)  maximum price; given quantity
D)  minimum price; maximum quantity
E)  none of the options

Question 7

A negotiable CD

Accepted Answer

A)  is a bank-issued transactions deposit.
B)  is a registered instrument.
C)  is a bank-issued time deposit.
D)  has denominations ranging from $50,000 to $10 million.
E)  pays discount interest.

Question 8

One-hundred-eighty-day commercial paper can be bought at a 3.75 percent discount. What are the bond equivalent yield and the effective annual rate on the commercial paper?
 Why do these rates differ?

Accepted Answer

Commercial paper price/100 of par = 100 ...

Question 9

Money markets exist to help reduce the opportunity cost of holding cash balances.

Accepted Answer

A) True 
 B)False

Question 10

Who are the major participants in money markets?

Accepted Answer

U.S. Treasury
Commercial banks...

Question 11

A 180-day $3 million CD has a 4.25 percent annual rate quote. If you buy the CD,how much will you collect in 180 days?

Accepted Answer

A)  $3,047,439
B)  $3,045.678
C)  $3,062,877
D)  $3,063,750
E)  $3,127,500

Question 12

In a Treasury auction,preferential bidding status is granted to

Accepted Answer

A)  competitive bidders.
B)  noncompetitive bidders.
C)  short sale committed bidders.
D)  commercial bank bidders.
E)  no group of bidders.

Question 13

Money market securities exhibit which of the following?
I. Large denomination
II. Maturity greater than one year
III. Low default risk
IV. Contractually determined cash flows

Accepted Answer

A)  I,II,and III
B)  I,III,and IV
C)  II,III,and IV
D)  II and IV
E)  I,II,III,and IV

Question 14

Eurodollar CDs would include

Accepted Answer

A)  CDs denominated in euros.
B)  dollar investments by European entities in the United States.
C)  dollars deposited in Caribbean banks.
D)  dollars deposited in Europe.
E)  dollars deposited in Caribbean banks and dollars deposited in Europe.

Question 15

The following formula is used to calculate the _____________ of a money market investment.

Accepted Answer

A)  EAR
B)  APR
C)  single-payment yield
D)  discount yield
E)  BEY

Question 16

Euro commercial paper is a short-term obligation of the European Central Bank.

Accepted Answer

A) True 
 B)False

Question 17

Fed funds are short-term unsecured loans while repos are short-term secured loans.

Accepted Answer

A) True 
 B)False

Question 18

The most liquid of the money market securities are

Accepted Answer

A)  commercial paper.
B)  banker's acceptances.
C)  T-bills.
D)  Fed funds.
E)  repurchase agreements.

Question 19

The discount yield on a T-bill differs from the T-bill's bond equivalent yield (BEY) because
I. the discount yield is the return per dollar of face value and the BEY is a return per dollar originally invested.
II. a 360-day year is used on the discount yield and the BEY uses 365 days.
III. the discount yield is calculated without compounding,and the BEY is calculated with compounding.

Accepted Answer

A)  I only
B)  II only
C)  I and II only
D)  II and III only
E)  I,II,and III

Question 20

Why do most money market securities have large denominations?

Accepted Answer

The market has developed for institution...

Exam 5: Money Markets

For the purposes for which they are used,money market securities should have which of the following characteristics? I. Low trading costs II. Little price risk III. High rate of return IV. Life greater than one year

Correct Answer
verified

Commercial paper,Treasury bills,and banker's acceptance rates are all quoted as discount yields.

Correct Answer
verified

In the T-bill auction process,the competitive bidder is guaranteed a and a noncompetitive bidder is guaranteed a _.

Correct Answer
verified

A 180-day $3 million CD has a 4.25 percent annual rate quote. If you buy the CD,how much will you collect in 180 days?

Correct Answer
verified

Euro commercial paper is a short-term obligation of the European Central Bank.

Correct Answer
verified

Money markets exist to help reduce the opportunity cost of holding cash balances.

Correct Answer
verified

A negotiable CD

Correct Answer
verified

The following formula is used to calculate the _____________ of a money market investment.

Correct Answer
verified

Correct Answer
verified

How does a repo differ from a Fed funds transaction? How do their rates compare?

Correct Answer
verified
A repo is basically a collateralized loa...
View Answer

Eurodollar CDs would include

Correct Answer
verified

One-hundred-eighty-day commercial paper can be bought at a 3.75 percent discount. What are the bond equivalent yield and the effective annual rate on the commercial paper? Why do these rates differ?

Correct Answer
verified
Commercial paper price/100 of par = 100 ...
View Answer

Fed funds are short-term unsecured loans while repos are short-term secured loans.

Correct Answer
verified

A banker's acceptance is

Correct Answer
verified

In a Treasury auction,preferential bidding status is granted to

Correct Answer
verified

Who are the major participants in money markets?

Correct Answer
verified
U.S. Treasury
Commercial banks...
View Answer

A 50-day maturity money market security has a bond equivalent yield of 3.60 percent. The security's EAR is

Correct Answer
verified

Why do most money market securities have large denominations?

Correct Answer
verified
The market has developed for institution...
View Answer

Money market securities exhibit which of the following? I. Large denomination II. Maturity greater than one year III. Low default risk IV. Contractually determined cash flows

Correct Answer
verified

The most liquid of the money market securities are

Correct Answer
verified

Exam 5: Money Markets

For the purposes for which they are used,money market securities should have which of the following characteristics? I. Low trading costs II. Little price risk III. High rate of return IV. Life greater than one year

Correct AnswerverifiedShow Answer

Commercial paper,Treasury bills,and banker's acceptance rates are all quoted as discount yields.

Correct AnswerverifiedShow Answer

In the T-bill auction process,the competitive bidder is guaranteed a ______________ and a noncompetitive bidder is guaranteed a _______________.

Correct AnswerverifiedShow Answer

A 180-day $3 million CD has a 4.25 percent annual rate quote. If you buy the CD,how much will you collect in 180 days?

Correct AnswerverifiedShow Answer

Euro commercial paper is a short-term obligation of the European Central Bank.

Correct AnswerverifiedShow Answer

Money markets exist to help reduce the opportunity cost of holding cash balances.

Correct AnswerverifiedShow Answer

A negotiable CD

Correct AnswerverifiedShow Answer

The following formula is used to calculate the _____________ of a money market investment.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

How does a repo differ from a Fed funds transaction? How do their rates compare?

Correct AnswerverifiedA repo is basically a collateralized loa...View AnswerShow Answer

Eurodollar CDs would include

Correct AnswerverifiedShow Answer

One-hundred-eighty-day commercial paper can be bought at a 3.75 percent discount. What are the bond equivalent yield and the effective annual rate on the commercial paper? Why do these rates differ?

Correct AnswerverifiedCommercial paper price/100 of par = 100 ...View AnswerShow Answer

Fed funds are short-term unsecured loans while repos are short-term secured loans.

Correct AnswerverifiedShow Answer

A banker's acceptance is

Correct AnswerverifiedShow Answer

In a Treasury auction,preferential bidding status is granted to

Correct AnswerverifiedShow Answer

Who are the major participants in money markets?

Correct AnswerverifiedU.S. TreasuryCommercial banks...View AnswerShow Answer

A 50-day maturity money market security has a bond equivalent yield of 3.60 percent. The security's EAR is

Correct AnswerverifiedShow Answer

Why do most money market securities have large denominations?

Correct AnswerverifiedThe market has developed for institution...View AnswerShow Answer

Money market securities exhibit which of the following? I. Large denomination II. Maturity greater than one year III. Low default risk IV. Contractually determined cash flows

Correct AnswerverifiedShow Answer

The most liquid of the money market securities are

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

In the T-bill auction process,the competitive bidder is guaranteed a and a noncompetitive bidder is guaranteed a _.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A repo is basically a collateralized loa...
View Answer

Correct Answer
verified

Correct Answer
verified
Commercial paper price/100 of par = 100 ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
U.S. Treasury
Commercial banks...
View Answer

Correct Answer
verified

Correct Answer
verified
The market has developed for institution...
View Answer

Correct Answer
verified

Correct Answer
verified