Question 1

Large corporations typically make ____ bids for T-bills so they can purchase larger amounts.

Accepted Answer

A)  competitive
B)  noncompetitive
C)  very small
D)  none of the aboveE) A) and C)
F) A) and D)

Question 2

When firms sell commercial paper at a ____ price than they projected, their cost of raising funds is ____ than projected.

Accepted Answer

A)  higher; higher
B)  lower; lower
C)  A and B
D)  none of the aboveE) A) and B)
F) A) and C)

Question 3

Which of the following is sometimes issued in the primary market by nonfinancial firms to borrow funds?

Accepted Answer

A)  NCDs
B)  retail CDs
C)  commercial paper
D)  federal fundsE) B) and C)
F) A) and B)

Question 4

____ are sold at an auction at a discount from par value.

Accepted Answer

A)  Treasury bills
B)  Repurchase agreements
C)  Banker's acceptances
D)  Commercial paperE) A) and B)
F) B) and C)

Question 5

If an investor buys a T-bill with a 90-day maturity and $50,000 par value for $48,500 and holds it to maturity, what is the annualized yield?

Accepted Answer

A)  about 13.4 percent
B)  about 12.5 percent
C)  about 11.3 percent
D)  about 11.6 percent
E)  about 10.7 percentF) A) and D)
G) None of the above

Question 6

Most repo transactions use government securities.

Accepted Answer

A) True 
 B)False

Question 7

The so-called "flight to quality" causes the risk differential between risky and risk-free securities to be

Accepted Answer

A)  eliminated.
B)  reduced.
C)  increased.
D)  unchanged (there is no effect) .E) B) and D)
F) B) and C)

Question 8

A ____ is not a money market security.

Accepted Answer

A)  Treasury bill
B)  negotiable certificate of deposit
C)  bond
D)  banker's acceptance
E)  All of the above are money market securities.F) B) and E)
G) C) and E)

Question 9

When a bank guarantees a future payment to a firm, the financial instrument used is called

Accepted Answer

A)  a repurchase agreement.
B)  a negotiable CD.
C)  a banker's acceptance.
D)  commercial paper.E) A) and B)
F) None of the above

Question 10

Eurodollar deposits

Accepted Answer

A)  are U.S.dollars deposited in the U.S.by European investors.
B)  are subject to interest rate ceilings.
C)  have a relatively large spread between deposit and loan rates (compared to the spread between deposits and loans in the United States) .
D)  are not subject to reserve requirements.E) All of the above
F) None of the above

Question 11

An investor buys a T-bill with 180 days to maturity and $250,000 par value for $242,000.He plans to sell it after 60 days, and forecasts a selling price of $247,000 at that time.What is the annualized yield based on this expectation?

Accepted Answer

A)  about 10.1 percent
B)  about 12.6 percent
C)  about 11.4 percent
D)  about 13.5 percent
E)  about 14.3 percentF) C) and D)
G) A) and B)

Exam 6: Money Markets

An investor buys a T-bill with 180 days to maturity and $250,000 par value for $242,000.He plans to sell it after 60 days, and forecasts a selling price of $247,000 at that time.What is the annualized yield based on this expectation?

Correct Answer
verified

Most repo transactions use government securities.

Correct Answer
verified

When a bank guarantees a future payment to a firm, the financial instrument used is called

Correct Answer
verified

When firms sell commercial paper at a price than they projected, their cost of raising funds is than projected.

Correct Answer
verified

The so-called "flight to quality" causes the risk differential between risky and risk-free securities to be

Correct Answer
verified

Large corporations typically make ____ bids for T-bills so they can purchase larger amounts.

Correct Answer
verified

A ____ is not a money market security.

Correct Answer
verified

If an investor buys a T-bill with a 90-day maturity and $50,000 par value for $48,500 and holds it to maturity, what is the annualized yield?

Correct Answer
verified

Eurodollar deposits

Correct Answer
verified

Which of the following is sometimes issued in the primary market by nonfinancial firms to borrow funds?

Correct Answer
verified

____ are sold at an auction at a discount from par value.

Correct Answer
verified

Exam 6: Money Markets

An investor buys a T-bill with 180 days to maturity and $250,000 par value for $242,000.He plans to sell it after 60 days, and forecasts a selling price of $247,000 at that time.What is the annualized yield based on this expectation?

Correct AnswerverifiedShow Answer

Most repo transactions use government securities.

Correct AnswerverifiedShow Answer

When a bank guarantees a future payment to a firm, the financial instrument used is called

Correct AnswerverifiedShow Answer

When firms sell commercial paper at a ____ price than they projected, their cost of raising funds is ____ than projected.

Correct AnswerverifiedShow Answer

The so-called "flight to quality" causes the risk differential between risky and risk-free securities to be

Correct AnswerverifiedShow Answer

Large corporations typically make ____ bids for T-bills so they can purchase larger amounts.

Correct AnswerverifiedShow Answer

A ____ is not a money market security.

Correct AnswerverifiedShow Answer

If an investor buys a T-bill with a 90-day maturity and $50,000 par value for $48,500 and holds it to maturity, what is the annualized yield?

Correct AnswerverifiedShow Answer

Eurodollar deposits

Correct AnswerverifiedShow Answer

Which of the following is sometimes issued in the primary market by nonfinancial firms to borrow funds?

Correct AnswerverifiedShow Answer

____ are sold at an auction at a discount from par value.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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When firms sell commercial paper at a price than they projected, their cost of raising funds is than projected.

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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