Exam 21: The Markets for Bank Obligations

The Federal Reserve Bulletin defines "the daily effective rate" as ________.

Foreign banks are by far the largest holders of federal funds, with most transactions involving fed funds lasting for only one night.

Which of the below statements is TRUE?

Investing in bankers acceptances exposes the investor to credit risk. Describe this risk.

The federal funds rate is lower than the repo rate because the lending of federal funds is done on an unsecured basis.

Banks in the United States can be classified into four groups. Which of the below is NOT one of these four classifications?

Of all depository institutions, ________ are by far the largest holders of federal funds.

The ________ are tied together because both are a means for a bank to borrow.

Simply put, a ________ is a vehicle created to facilitate commercial trade transactions.

CD yields are lower than yields on Treasury securities of the same maturity.

Yankee banks are foreign banks with U.S. branches. Included in this group are non-Japanese branches of foreign banks, such as Credit Lyonnais and Deutsche Bank.

The yields on ________ play an important role in the world financial markets because they are viewed globally as the cost of bank borrowing since they are effectively the rates at which major international banks offer to pay each other to borrow money by issuing a ________ with given maturities.

________ is an interest rate that changes periodically in accordance with a predetermined formula that indicates the spread (or margin) above some index at which the rate will reset periodically.

For a ________, the initial depositor must wait until the maturity date of the CD to obtain the funds.

Which of the below statements is FALSE?

Money center banks are banks that raise most of their funds from the domestic and international money markets and rely less on depositors for funds.

The yields posted on CDs vary depending on three factors. Name these three factors.

The rate determined in the ________ is the major factor that influences the rates paid on all the other money market instruments.

Through its ________ that lower or raise the level of excess reserves in the banking system, the Fed will often change the fed funds rate as part of its effort to change the rate of activity in the country's economy.

The fed funds rate often shows a low level of volatility over short periods of time.