Question 1

Which of the following statements is most correct?

Accepted Answer

A)   Commercial paper may be issues in either a discount form or interest-bearing form.
B)   Commercial paper is classified as either direct paper or dealer-placed paper.
C)   The secondary market for commercial paper is very active.
D)   Commercial paper is more liquid than Treasury bills.
E)   a and b only.F) A) and E)
G) A) and D)

Question 2

The assets traded in the money market include:

Accepted Answer

A)   Commercial paper.
B)   Bankers acceptances.
C)   Treasury bills.
D)   Corporate bonds.
E)   a, b, and c only.F) None of the above
G) B) and C)

Question 3

Banks that create bankers' acceptances are called accepting banks.

Accepted Answer

A) True 
 B)False

Question 4

The maturity of commercial paper is typically less than 270 days because:

Accepted Answer

A)   It does not require registration with the SEC.
B)   It avoids the costs associated with registering issues with the SEC.
C)   It does not require collateral.
D)   a and b only.
E)   All of the above.F) C) and D)
G) D) and E)

Question 5

The money market is the market for:

Accepted Answer

A)   Long-term bonds.
B)   Common stock.
C)   Short-term financial instruments.
D)   Agency securities.
E)   None of the above.F) A) and B)
G) A) and C)

Question 6

Eurocommerical paper:

Accepted Answer

A)   Is issued and placed outside the jurisdiction of the currency of the denomination.
B)   Has considerably longer maturity than domestic commercial paper.
C)   Is almost always dealer placed.
D)   Has an active secondary market.
E)   All of the above.F) A) and D)
G) D) and E)

Question 7

The federal funds rate:

Accepted Answer

A)   Is determined by the supply and demand for federal funds.
B)   Is the rate at which all money market interest rates are anchored.
C)   Is often a target of the Fed's monetary policy.
D)   Is higher than the repo rate because federal funds are borrowed on an unsecured basis.
E)   All of the above.F) A) and C)
G) B) and E)

Question 8

Treasury bills are quoted on a bank discount basis, not on a price basis.

Accepted Answer

A) True 
 B)False

Question 9

There is no single repo rate; rather rates vary from transaction to transaction depending on:

Accepted Answer

A)   Quality.
B)   Term of the repo.
C)   Delivery requirement
D)   Availability of collateral.
E)   All of the above.F) B) and D)
G) None of the above E

Question 10

Investors in commercial paper include:

Accepted Answer

A)   Pension funds.
B)   Money market mutual funds.
C)   Commercial bank trust departments.
D)   State and local governments.
E)   All of the above.F) All of the above
G) B) and D) E

Question 11

Commercial paper is:

Accepted Answer

A)   Is issued by corporations with strong credit ratings.
B)   A short-term promissory note.
C)   Issued on an unsecured basis.
D)   B and c only.
E)   All of the above.F) A) and E)
G) B) and E)

Question 12

The yields on CDs are a function of:

Accepted Answer

A)   The credit rating of the issuing bank.
B)   The maturity of the CD.
C)   The supply and demand for CDs.
D)   The back-up line of credit.
E)   a, b, and c only.F) B) and E)
G) A) and E)

Question 13

Both parties to a repo transaction are exposed to credit risk.

Accepted Answer

A) True 
 B)False

Question 14

Market participants perceive Treasury securities to carry no default risk because:

Accepted Answer

A)   They are short-term in nature.
B)   They are backed by the full faith and credit of the U.S. government.
C)   They can be bought and sold easily.
D)   They are not affected by changes in interest rates.
E)   None of the above.F) A) and D)
G) B) and D)

Question 15

Why does risk occur in a repo transaction?

Accepted Answer

a. Market value of s...

Question 16

Large-denomination CDs are typically issued in denominations of $1 million or more.

Accepted Answer

A) True 
 B)False

Question 17

The sale of a security with a commitment by the seller to buy the security back from the purchaser at a specified price and a designated future date is referred to as:

Accepted Answer

A)   A negotiable CD.
B)   A repurchase agreement.
C)   A reverse repo.
D)   A commercial paper.
E)   None of the above.F) D) and E)
G) C) and E) B

Question 18

Bankers' acceptances are sold on a discounted basis just like:

Accepted Answer

A)   Treasury bills.
B)   Commercial paper.
C)   CDs.
D)   a and b only.
E)   All of the above.F) A) and E)
G) C) and E)

Question 19

Compare and contrast Treasury bills, commercial paper, and certificates of deposits.

Accepted Answer

a. Maturity.
b. Inte...

Question 20

Commercial paper provides short-term funds for:

Accepted Answer

A)   Seasonal needs.
B)   Working capital needs.
C)   Bridge financing.
D)   A and b only.
E)   All of the above.F) B) and C)
G) A) and B)

Exam 20: Money Markets

Which of the following statements is most correct?

Correct AnswerverifiedShow Answer

The assets traded in the money market include:

Correct AnswerverifiedShow Answer

Banks that create bankers' acceptances are called accepting banks.

Correct AnswerverifiedShow Answer

The maturity of commercial paper is typically less than 270 days because:

Correct AnswerverifiedShow Answer

The money market is the market for:

Correct AnswerverifiedShow Answer

Eurocommerical paper:

Correct AnswerverifiedShow Answer

The federal funds rate:

Correct AnswerverifiedShow Answer

Treasury bills are quoted on a bank discount basis, not on a price basis.

Correct AnswerverifiedShow Answer

There is no single repo rate; rather rates vary from transaction to transaction depending on:

Correct AnswerverifiedE

Investors in commercial paper include:

Correct AnswerverifiedE

Commercial paper is:

Correct AnswerverifiedShow Answer

The yields on CDs are a function of:

Correct AnswerverifiedShow Answer

Both parties to a repo transaction are exposed to credit risk.

Correct AnswerverifiedShow Answer

Market participants perceive Treasury securities to carry no default risk because:

Correct AnswerverifiedShow Answer

Why does risk occur in a repo transaction?

Correct Answerverifieda. Market value of s...View AnswerShow Answer

Large-denomination CDs are typically issued in denominations of $1 million or more.

Correct AnswerverifiedShow Answer

The sale of a security with a commitment by the seller to buy the security back from the purchaser at a specified price and a designated future date is referred to as:

Correct AnswerverifiedB

Bankers' acceptances are sold on a discounted basis just like:

Correct AnswerverifiedShow Answer

Compare and contrast Treasury bills, commercial paper, and certificates of deposits.

Correct Answerverifieda. Maturity.b. Inte...View AnswerShow Answer

Commercial paper provides short-term funds for:

Correct AnswerverifiedShow Answer

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E

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E

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a. Market value of s...
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B

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a. Maturity.
b. Inte...
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