Question 1

Explain the economic function of money markets.

Accepted Answer

Money markets are markets for ...

Question 2

On August 8, 2011, Finance Yahoo! reports a 90-day T-Bill with a face value of $10,000 that is quoted at 3.25 bid, 3.05 ask. Given the above information, what are the selling and purchasing prices of this T-bill?

Accepted Answer

This T-bill can be bought at $...

Question 3

Explain why most money market interest rates tend to move together over time.

Accepted Answer

To the extent that securities with vario...

Question 4

The bank discount rate (ask)  on a 71-day T-bill is 4.86%. What is the bond equivalent yield on the T-bill?

Accepted Answer

A)   4.86%
B)   4.92%
C)   4.98%
D)   5.14%E) None of the above
F) All of the above

Question 5

For large corporations, commercial paper is more expensive but is a more assured alternative to bank borrowing.

Accepted Answer

A) True 
 B)False

Question 6

Small investors are likely to invest in the money market through ____.

Accepted Answer

A)   directly; commercial paper
B)   locally; their credit union
C)   indirectly; negotiable CDs
D)   indirectly; money market mutual fundsE) A) and C)
F) C) and D)

Question 7

What is a banker's acceptance? Why are banker's acceptances ideally suited for foreign trade transactions?

Accepted Answer

A banker's acceptance is a trade bill of...

Question 8

A repurchase agreement is like a secured loan because

Accepted Answer

A)   it involves two parties.
B)   it involves collateral, in this case the sale of a security under agreement to repurchase.
C)   it is backed by a mortgage on real property.
D)   it is like the secured lending in that a mortgage is effected by the lender.E) None of the above
F) All of the above

Question 9

The bank discount rate (ask)  on a 91-day T-bill is 5.35%. What is the price of the $1000 T-bill?

Accepted Answer

A)   $976.40
B)   $986.48
C)   $981.20
D)   $989.45E) None of the above
F) B) and D)

Question 10

Which of the following statements about the money market is true?

Accepted Answer

A)   The money market is a dealer market linked by efficient communications systems.
B)   Money market transactions are seldom over $1 million.
C)   Money market transactions include more "primary market" trades for a security than secondary market trades.
D)   Most money market transactions are conducted by mail.
E)   All of the above statements are true.F) D) and E)
G) A) and B)

Question 11

The higher yields of federal agency securities relative to T-bills is attributed mostly to the lower marketability of agency securities.

Accepted Answer

A) True 
 B)False

Question 12

Federal agency securities have higher yields than Treasury securities because

Accepted Answer

A)   they are less marketable than Treasury securities.
B)   they have higher exchange rate risk than Treasuries.
C)   they are more affected by interest rate risk.
D)   they are associated with mortgages that are riskier securities.
E)   Federal agency securities actually have lower yields than Treasury securities.F) A) and D)
G) A) and C)

Question 13

The money market is a dealer market, not an exchange, and has no specific location.

Accepted Answer

A) True 
 B)False

Question 14

The T-bill rate quoted by the Federal Reserve banks is the

Accepted Answer

A)   bank discount rate.
B)   the true rate.
C)   effective annual rate.
D)   bond equivalent rate.
E)   the primary rateF) A) and C)
G) C) and D)

Question 15

Bankers' acceptances are used primarily for financing international trade.

Accepted Answer

A) True 
 B)False

Question 16

An important economic function of the U.S. government security dealer is to

Accepted Answer

A)   underwrite Treasury securities.
B)   "make a market" for Treasury securities.
C)   support open market operations of the Federal Reserve.
D)   all of the aboveE) B) and D)
F) A) and D)

Question 17

A competitive bid in the Treasury securities auction market has all of the following characteristics except:

Accepted Answer

A)   the bidder specifying the quantity of bills desired
B)   the price the investor wishes to pay
C)   large, institutional investors
D)   bids for a maximum of $5,000,000.E) All of the above
F) A) and C)

Question 18

The Federal Funds market is not available for smaller, regional banks.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following money market instruments would typically be used in international transactions?

Accepted Answer

A)   a Treasury bill
B)   a banker's acceptance
C)   commercial paper
D)   a negotiable CDE) A) and B)
F) A) and C)

Question 20

Which of the following statements about negotiable certificates of deposits (NCDs)  is true?

Accepted Answer

A)   NCDs usually have denominations of less than $100,000.
B)   NCDs usually have lower yields than regular CDs.
C)   NCDs have no secondary market
D)   Large banks are usually able to pay lower interest rates on NCDs than smaller regional banks.
E)   All of the above statements are true.F) D) and E)
G) B) and E)

Exam 7: Money Markets

Which of the following statements about negotiable certificates of deposits (NCDs) is true?

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A repurchase agreement is like a secured loan because

Correct AnswerverifiedShow Answer

Which of the following statements about the money market is true?

Correct AnswerverifiedShow Answer

Explain why most money market interest rates tend to move together over time.

Correct AnswerverifiedTo the extent that securities with vario...View AnswerShow Answer

The Federal Funds market is not available for smaller, regional banks.

Correct AnswerverifiedShow Answer

The bank discount rate (ask) on a 91-day T-bill is 5.35%. What is the price of the $1000 T-bill?

Correct AnswerverifiedShow Answer

Which of the following money market instruments would typically be used in international transactions?

Correct AnswerverifiedShow Answer

The bank discount rate (ask) on a 71-day T-bill is 4.86%. What is the bond equivalent yield on the T-bill?

Correct AnswerverifiedShow Answer

The money market is a dealer market, not an exchange, and has no specific location.

Correct AnswerverifiedShow Answer

Explain the economic function of money markets.

Correct AnswerverifiedMoney markets are markets for ...View AnswerShow Answer

A competitive bid in the Treasury securities auction market has all of the following characteristics except:

Correct AnswerverifiedShow Answer

On August 8, 2011, Finance Yahoo! reports a 90-day T-Bill with a face value of $10,000 that is quoted at 3.25 bid, 3.05 ask. Given the above information, what are the selling and purchasing prices of this T-bill?

Correct AnswerverifiedThis T-bill can be bought at $...View AnswerShow Answer

Federal agency securities have higher yields than Treasury securities because

Correct AnswerverifiedShow Answer

The T-bill rate quoted by the Federal Reserve banks is the

Correct AnswerverifiedShow Answer

Small investors are likely to invest in the money market through ____.

Correct AnswerverifiedShow Answer

The higher yields of federal agency securities relative to T-bills is attributed mostly to the lower marketability of agency securities.

Correct AnswerverifiedShow Answer

What is a banker's acceptance? Why are banker's acceptances ideally suited for foreign trade transactions?

Correct AnswerverifiedA banker's acceptance is a trade bill of...View AnswerShow Answer

Bankers' acceptances are used primarily for financing international trade.

Correct AnswerverifiedShow Answer

For large corporations, commercial paper is more expensive but is a more assured alternative to bank borrowing.

Correct AnswerverifiedShow Answer

An important economic function of the U.S. government security dealer is to

Correct AnswerverifiedShow Answer

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To the extent that securities with vario...
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Money markets are markets for ...
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This T-bill can be bought at $...
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A banker's acceptance is a trade bill of...
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