Exam 6: Money Markets

Freeman Corp., a large corporation, plans to issue 45-day commercial paper with a par value of $3,000,000. Freeman expects to sell the commercial paper for $2,947,000. Freeman's annualized cost of borrowing is estimated to be ____ percent.

The money market interest rate paid by corporations that borrow short-term funds in a particular country is typically

The LIBOR scandal in 2012 involved

Treasury bills

LIBOR is

An increase in an indicator of inflation such as the consumer price index may create expectations of ________ interest rates and place _______ pressure on the prices of money market securities.

Money market security values are less sensitive to interest rate movements than bonds.

The effective yield of a foreign money market security is ____ when the foreign currency weakens against the dollar.

Because money market securities have a short-term maturity and typically cannot be sold easily, they provide investors with a low degree of liquidity.

At each T-bill auction, the prices paid for three-month T-bills are significantly lower than the prices paid for six-month bills.

The yields offered on asset-backed commercial paper are often ______ the yields offered on unsecured commercial paper.

The rate on Eurodollar floating-rate CDs is based on

The yield on commercial paper is ____ the yield of Treasury bills of the same maturity. The difference between their yields would be especially large during a ____ period.

Which of the following securities is most likely to be used in a repo transaction?

The amount of commercial paper outstanding today is approximately twice as large as it was before the credit crisis that began in 2008.

Which of the following statements is incorrect with respect to the federal funds rate?

The rate at which depository institutions effectively lend or borrow funds from each other is the ____.

An investor buys commercial paper with a 60-day maturity for $985,000. Par value is $1,000,000, and the investor holds it to maturity. What is the annualized yield?

Credit guarantees for commercial paper

If economic conditions cause investors to sell stocks because they want to invest in safer securities with much liquidity, this should cause a ____ demand for money market securities, which would place ____ pressure on the yields of money market securities.