Question 1

The interest rate charged for a short-term loan from a bank to a corporation is referred to as the London Interbank Offer Rate (LIBOR).

Accepted Answer

A) True 
 B)False

Question 2

Commercial paper has a maximum maturity of ____ days.

Accepted Answer

A) 45 
B) 270 
C) 360 
D) None of these are correct. 
A) 45 
B) 270 
C) 360 
D) None of these are correct.

Question 3

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. 
A) a repurchase agreement. 
B) a negotiable CD. 
C) a banker's acceptance. 
D) commercial paper.

Question 4

Junk commercial paper is commercial paper that is not rated or has a low rating.

Accepted Answer

A) True 
 B)False

Question 5

At a given point in time, the actual price paid for a three-month Treasury bill is

Accepted Answer

A) usually equal to the par value. 
B) more than the price paid for a six-month Treasury bill. 
C) equal to the price paid for a six-month Treasury bill. 
D) None of these are correct. 
A) usually equal to the par value. 
B) more than the price paid for a six-month Treasury bill. 
C) equal to the price paid for a six-month Treasury bill. 
D) None of these are correct.

Question 6

An investor purchased an NCD a year ago in the secondary market for $980,000. She redeems it today and receives $1,000,000. She also receives interest of $30,000. The investor's annualized yield on this investment is

Accepted Answer

A) 2.0 percent. 
B) 5.10 percent. 
C) 5.00 percent. 
D) 2.04 percent. 
A) 2.0 percent. 
B) 5.10 percent. 
C) 5.00 percent. 
D) 2.04 percent.

Question 7

Money markets are used to facilitate the transfer of short-term funds from individuals, corporations, or governments with excess funds to those with deficient funds.

Accepted Answer

A) True 
 B)False

Question 8

A private investor purchases a six-month (182-day)T-bill with a $10,000 par value for $9,800. If she holds the Treasury bill to maturity, her annualized yield is ____ percent.

Accepted Answer

A) 3.96 
B) 4.54 
C) 1.50 
D) 4.09 
E) None of these are correct. 
A) 3.96 
B) 4.54 
C) 1.50 
D) 4.09 
E) None of these are correct.

Question 9

You purchase a six-month (182-day)T-bill with a $10,000 par value for $9,800. The Treasury bill discount is ____ percent.

Accepted Answer

A) 3.96 
B) 4.09 
C) 6.20 
D) 3.56 
E) None of these are correct. 
A) 3.96 
B) 4.09 
C) 6.20 
D) 3.56 
E) None of these are correct.

Question 10

A line of credit provided by a commercial bank gives a company the right (but not the obligation)to borrow a specified maximum amount of funds over a specified period of time.

Accepted Answer

A) True 
 B)False

Question 11

Jarrod King, a private investor, purchases a Treasury bill with a $10,000 par value for $9,645. One hundred days later, Jarrod sells the T-bill for $9,719. What is Jarrod's expected annualized yield from this transaction?

Accepted Answer

A) 13.43 percent 
B) 2.25 percent 
C) 10.55 percent 
D) 2.80 percent 
E) None of these are correct. 
A) 13.43 percent 
B) 2.25 percent 
C) 10.55 percent 
D) 2.80 percent 
E) None of these are correct.

Question 12

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 above 
A) competitive 
B) noncompetitive 
C) very small 
D) none of the above

Question 13

Which of the following is true of money market instruments?

Accepted Answer

A) Their yields are highly correlated over time. 
B) They typically sell for par value when they are initially issued (especially T-bills and commercial paper). 
C) Treasury bills have the highest yield. 
D) They all make periodic coupon (interest)payments. 
E) They typically sell for par value when they are initially issued (especially T-bills and commercial paper)AND t reasury bills have the highest yield. 
A) Their yields are highly correlated over time. 
B) They typically sell for par value when they are initially issued (especially T-bills and commercial paper). 
C) Treasury bills have the highest yield. 
D) They all make periodic coupon (interest)payments. 
E) They typically sell for par value when they are initially issued (especially T-bills and commercial paper)AND t reasury bills have the highest yield.

Question 14

An investor, purchases a six-month (182-day)T-bill with a $10,000 par value for $9,700. If the Treasury bill is held to maturity, the annualized yield is ____ percent.

Accepted Answer

A) 6.52 
B) 1.54 
C) 1.50 
D) 6.20 
E) None of these are correct. 
A) 6.52 
B) 1.54 
C) 1.50 
D) 6.20 
E) None of these are correct.

Question 15

Commercial paper is

Accepted Answer

A) always directly placed with investors. 
B) always placed with the help of commercial paper dealers. 
C) placed either directly or with the help of commercial paper dealers. 
D) always placed by bank holding companies. 
A) always directly placed with investors. 
B) always placed with the help of commercial paper dealers. 
C) placed either directly or with the help of commercial paper dealers. 
D) always placed by bank holding companies.

Question 16

Assume investors require a 5 percent annualized return on a six-month T-bill with a par value of $10,000. The price investors would be willing to pay is $____.

Accepted Answer

A) 10,000 
B) 9,524 
C) 9,756 
D) None of these are correct. 
A) 10,000 
B) 9,524 
C) 9,756 
D) None of these are correct.

Question 17

The federal funds market allows depository institutions to borrow

Accepted Answer

A) short-term funds from each other. 
B) short-term funds from the Treasury. 
C) long-term funds from each other. 
D) long-term funds from the Federal Reserve. 
E) short-term funds from the Treasury AND long-term funds from the Federal Reserve. 
A) short-term funds from each other. 
B) short-term funds from the Treasury. 
C) long-term funds from each other. 
D) long-term funds from the Federal Reserve. 
E) short-term funds from the Treasury AND long-term funds from the Federal Reserve.

Question 18

The price that competitive and noncompetitive bidders will pay at a Treasury bill auction is the

Accepted Answer

A) highest price entered by a competitive bidder. 
B) highest price entered by a noncompetitive bidder. 
C) lowest accepted bid price entered by a competitive bidder. 
D) equally weighted average price paid by all competitive bidders whose bids were accepted. 
E) None of these are correct. 
A) highest price entered by a competitive bidder. 
B) highest price entered by a noncompetitive bidder. 
C) lowest accepted bid price entered by a competitive bidder. 
D) equally weighted average price paid by all competitive bidders whose bids were accepted. 
E) None of these are correct.

Question 19

A newly issued T-bill with a $10,000 par value sells for $9,750, and has a 90-day maturity. What is the discount?

Accepted Answer

A) 10.26 percent 
B) 0.26 percent 
C) $2,500 
D) 10.00 percent 
E) 11.00 percent 
A) 10.26 percent 
B) 0.26 percent 
C) $2,500 
D) 10.00 percent 
E) 11.00 percent

Question 20

T-bills and commercial paper are sold

Accepted Answer

A) with a stated coupon rate. 
B) at a discount from par value. 
C) at a premium above par value. 
D) with a stated coupon rate AND at a premium above par value. 
E) None of these are correct. 
A) with a stated coupon rate. 
B) at a discount from par value. 
C) at a premium above par value. 
D) with a stated coupon rate AND at a premium above par value. 
E) None of these are correct.

Exam 6: Money Markets

The interest rate charged for a short-term loan from a bank to a corporation is referred to as the London Interbank Offer Rate (LIBOR).

Commercial paper has a maximum maturity of ____ days.

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

Junk commercial paper is commercial paper that is not rated or has a low rating.

At a given point in time, the actual price paid for a three-month Treasury bill is

An investor purchased an NCD a year ago in the secondary market for $980,000. She redeems it today and receives $1,000,000. She also receives interest of $30,000. The investor's annualized yield on this investment is

Money markets are used to facilitate the transfer of short-term funds from individuals, corporations, or governments with excess funds to those with deficient funds.

A private investor purchases a six-month (182-day)T-bill with a $10,000 par value for $9,800. If she holds the Treasury bill to maturity, her annualized yield is ____ percent.

You purchase a six-month (182-day)T-bill with a $10,000 par value for $9,800. The Treasury bill discount is ____ percent.

A line of credit provided by a commercial bank gives a company the right (but not the obligation)to borrow a specified maximum amount of funds over a specified period of time.

Jarrod King, a private investor, purchases a Treasury bill with a $10,000 par value for $9,645. One hundred days later, Jarrod sells the T-bill for $9,719. What is Jarrod's expected annualized yield from this transaction?

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

Which of the following is true of money market instruments?

An investor, purchases a six-month (182-day)T-bill with a $10,000 par value for $9,700. If the Treasury bill is held to maturity, the annualized yield is ____ percent.

Commercial paper is

Assume investors require a 5 percent annualized return on a six-month T-bill with a par value of $10,000. The price investors would be willing to pay is $____.

The federal funds market allows depository institutions to borrow

The price that competitive and noncompetitive bidders will pay at a Treasury bill auction is the

A newly issued T-bill with a $10,000 par value sells for $9,750, and has a 90-day maturity. What is the discount?

T-bills and commercial paper are sold

Role of Financial Markets and Institutions

Determination of Interest Rates

Structure of Interest Rates

Functions of the Fed

Monetary Policy

Bond Markets

Bond Valuation and Risk

Mortgage Markets

Stock Offerings and Investor Monitoring

Stock Valuation and Risk

Market Microstructure and Strategies

Financial Futures Markets

Options Markets

Swap Markets

Foreign Exchange Derivative Markets

Commercial Bank Operations

Bank Regulation

Bank Management

Bank Performance

Thrift Operations

Finance Company Operations

Mutual Fund Operations

Securities Operations

Insurance and Pension Fund Operations

Pension Fund Operations

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