Question 1

If your firm enters into an overnight reverse repurchase agreement,your firm is

Accepted Answer

A)  borrowing Fed funds temporarily.
B)  selling a security now while agreeing to buy it back tomorrow.
C)  giving an unsecured loan to the counterparty.
D)  procuring a banker's acceptance.
E)  None of these choices are correct.F) D) and E)
G) A) and B)

Question 2

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.F) A) and E)
G) None of the above B

Question 3

If a $10,000 par T-bill has a 3.75 percent discount quote and a 90-day maturity,what is the price of the T-bill to the nearest dollar?

Accepted Answer

A)  $9,625.
B)  $9,906.
C)  $9,908.
D)  $9,627.
E)  None of these choices are correct.F) All of the above
G) A) and D)

Question 4

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

Accepted Answer

A) True 
 B)False  True

Question 5

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 IIIF) B) and C)
G) A) and E)

Question 6

A 90-day T-bill is selling for $9,900. The par is $10,000. The effective annual return on the T-bill is (watch your rounding)

Accepted Answer

A)  4.00 percent.
B)  4.16 percent.
C)  4.10 percent.
D)  4.04 percent.
E)  4.21 percent.F) All of the above
G) C) and E)

Question 7

How does a banker's acceptance (BA)help create more international trade?

Accepted Answer

Importers do not wish to pay until they receive the goods and exporters do not wish to ship until they receive payment. The creation of a BA allows the exporter to ship prior to receipt of payment,while substituting the creditworthiness of a large international bank for the unknown creditworthiness of the importer.

Question 8

What is the price of 182-day money market security with face value of $7,000 if the BEY is 3.574%?

Accepted Answer

A)  $6,877.44
B)  $6,925.48
C)  $6,634.47
D)  $6,725.36
E)  $6,452.39F) None of the above
G) A) and E)

Question 9

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.F) A) and B)
G) None of the above

Question 10

The most significant borrower in the U.S. money markets?

Accepted Answer

A)  Are commercial banks
B)  Are large corporations
C)  Is the U.S. Treasury
D)  Are the investment banks
E)  Are the insurance companiesF) B) and C)
G) A) and D)

Question 11

A repo is in essence a collateralized

Accepted Answer

A)  banker's acceptance.
B)  certificate of deposit.
C)  Fed funds loan.
D)  commercial paper loan.
E)  Eurodollar deposit.F) A) and B)
G) None of the above

Question 12

In the T-bill secondary market the ask yield will normally be less than the bid yield.

Accepted Answer

A) True 
 B)False

Question 13

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 14

A U.S. exporter sells $150,000 of furniture to a Latin American importer. The exporter requires the importer to obtain a letter of credit. When the bank accepts the draft,the exporter discounts the 120-day note at a 5.25 percent discount. What is the exporter's true effective annual financing cost?

Accepted Answer

A)  5.52 percent
B)  5.42 percent
C)  5.34 percent
D)  5.29 percent
E)  5.25 percentF) All of the above
G) B) and D)

Question 15

The U.S. Treasury switched from a discriminating price auction to a single price auction because the latter lowered the average price paid by investors.

Accepted Answer

A) True 
 B)False

Question 16

A corporate treasurer is looking to invest about $4 million for 60 days. Commercial paper rates are a 3.65 percent discount and CD rates are 3.66 percent. Comparing the bond equivalent yields over a 365-day year,which is the best alternative? What is the opportunity cost of leaving the funds idle? (Watch your rounding.)

Accepted Answer

Find the BEY on each CP: Price = $4 mill...

Question 17

A short-term unsecured promissory note issued by a company is

Accepted Answer

A)  commercial paper.
B)  a T-bill.
C)  a repurchase agreement.
D)  a negotiable CD.
E)  a banker's acceptance.F) B) and E)
G) C) and D)

Question 18

Who are the major participants in money markets?

Accepted Answer

U.S. Treasury Commercial banks...

Question 19

In dollars outstanding in 2016,the largest money market security was

Accepted Answer

A)  commercial paper.
B)  banker's acceptances.
C)  T-bills.
D)  Fed funds and repos.E) All of the above
F) A) and D)

Question 20

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.F) B) and C)
G) C) and D)

Exam 5: Money Markets

If your firm enters into an overnight reverse repurchase agreement,your firm is

Correct Answer
verified

In a Treasury auction,preferential bidding status is granted to

Correct Answer
verified
B

If a $10,000 par T-bill has a 3.75 percent discount quote and a 90-day maturity,what is the price of the T-bill to the nearest dollar?

Correct Answer
verified

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

Correct Answer
verified
True

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

A 90-day T-bill is selling for $9,900. The par is $10,000. The effective annual return on the T-bill is (watch your rounding)

Correct Answer
verified

How does a banker's acceptance (BA)help create more international trade?

What is the price of 182-day money market security with face value of $7,000 if the BEY is 3.574%?

Correct Answer
verified

A negotiable CD

Correct Answer
verified

The most significant borrower in the U.S. money markets?

Correct Answer
verified

A repo is in essence a collateralized

Correct Answer
verified

In the T-bill secondary market the ask yield will normally be less than the bid yield.

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

A U.S. exporter sells $150,000 of furniture to a Latin American importer. The exporter requires the importer to obtain a letter of credit. When the bank accepts the draft,the exporter discounts the 120-day note at a 5.25 percent discount. What is the exporter's true effective annual financing cost?

Correct Answer
verified

The U.S. Treasury switched from a discriminating price auction to a single price auction because the latter lowered the average price paid by investors.

Correct Answer
verified

Correct Answer
verified
Find the BEY on each CP: Price = $4 mill...
View Answer

A short-term unsecured promissory note issued by a company is

Correct Answer
verified

Who are the major participants in money markets?

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

In dollars outstanding in 2016,the largest money market security was

Correct Answer
verified

A banker's acceptance is

Correct Answer
verified

Exam 5: Money Markets

If your firm enters into an overnight reverse repurchase agreement,your firm is

Correct AnswerverifiedShow Answer

In a Treasury auction,preferential bidding status is granted to

Correct AnswerverifiedB

If a $10,000 par T-bill has a 3.75 percent discount quote and a 90-day maturity,what is the price of the T-bill to the nearest dollar?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedTrue

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

A 90-day T-bill is selling for $9,900. The par is $10,000. The effective annual return on the T-bill is (watch your rounding)

Correct AnswerverifiedShow Answer

How does a banker's acceptance (BA)help create more international trade?

What is the price of 182-day money market security with face value of $7,000 if the BEY is 3.574%?

Correct AnswerverifiedShow Answer

A negotiable CD

Correct AnswerverifiedShow Answer

The most significant borrower in the U.S. money markets?

Correct AnswerverifiedShow Answer

A repo is in essence a collateralized

Correct AnswerverifiedShow Answer

In the T-bill secondary market the ask yield will normally be less than the bid yield.

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

A U.S. exporter sells $150,000 of furniture to a Latin American importer. The exporter requires the importer to obtain a letter of credit. When the bank accepts the draft,the exporter discounts the 120-day note at a 5.25 percent discount. What is the exporter's true effective annual financing cost?

Correct AnswerverifiedShow Answer

The U.S. Treasury switched from a discriminating price auction to a single price auction because the latter lowered the average price paid by investors.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedFind the BEY on each CP: Price = $4 mill...View AnswerShow Answer

A short-term unsecured promissory note issued by a company is

Correct AnswerverifiedShow Answer

Who are the major participants in money markets?

Correct AnswerverifiedU.S. Treasury Commercial banks...View AnswerShow Answer

In dollars outstanding in 2016,the largest money market security was

Correct AnswerverifiedShow Answer

A banker's acceptance is

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified

Correct Answer
verified
True

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

Correct Answer
verified
Find the BEY on each CP: Price = $4 mill...
View Answer

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified