Question 1

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 A

Question 2

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)  6.2 
D)  3.56 
E)  none of the above 
A)  3.96 
B)  4.09 
C)  6.2 
D)  3.56 
E)  none of the above A

Question 3

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)  1.5 
D)  4.09 
E)  none of the above 
A)  3.96 
B)  4.54 
C)  1.5 
D)  4.09 
E)  none of the above D

Question 4

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 the above 
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 the above

Question 5

A ____ is not a money market security.

Accepted Answer

A)  Treasury bill 
B)  negotiable certificate of deposit 
C)  Bond 
D)  banker's acceptance 
E)  All of the above are money market securities. 
A)  Treasury bill 
B)  negotiable certificate of deposit 
C)  Bond 
D)  banker's acceptance 
E)  All of the above are money market securities.

Question 6

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

Accepted Answer

A)  increased 
B)  reduced 
C)  always negative 
D)  unaffected 
A)  increased 
B)  reduced 
C)  always negative 
D)  unaffected

Question 7

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 annualizedyield from this transaction?

Accepted Answer

A)  13.43 percent 
B)  2.78 percent 
C)  10.55 percent 
D)  2.80 percent 
E)  none of the above 
A)  13.43 percent 
B)  2.78 percent 
C)  10.55 percent 
D)  2.80 percent 
E)  none of the above

Question 8

Which of the following is sometimes issued in the primary market by nonfinancial firms to borrow funds?

Accepted Answer

A)  NCDs 
B)  retail CDs 
C)  commercial paper 
D)  federal funds 
A)  NCDs 
B)  retail CDs 
C)  commercial paper 
D)  federal funds

Question 9

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.

Accepted Answer

A)  higher than; recessionary 
B)  higher than; boom economy 
C)  less than; boom economy 
D)  less than; recessionary 
A)  higher than; recessionary 
B)  higher than; boom economy 
C)  less than; boom economy 
D)  less than; recessionary

Question 10

The LIBOR scandal in 2012 involved:

Accepted Answer

A)  banks reporting inflated earnings from their loans. 
B)  hackers breaking into the loan documentation files. 
C)  banks falsely reporting the interest rates they offered in the interbank market. 
D)  collusion among the banks when setting the commercial paper rate. 
A)  banks reporting inflated earnings from their loans. 
B)  hackers breaking into the loan documentation files. 
C)  banks falsely reporting the interest rates they offered in the interbank market. 
D)  collusion among the banks when setting the commercial paper rate.

Question 11

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)  6.02 
B)  1.54 
C)  1.5 
D)  6.2 
E)  none of the above 
A)  6.02 
B)  1.54 
C)  1.5 
D)  6.2 
E)  none of the above

Question 12

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

Accepted Answer

A)  equal to the rate paid by that country's government. 
B)  slightly higher than the rate paid by that country's government. 
C)  mostly influenced by the demand for and supply of long-term funds in that country. 
D)  set by the country's central bank. 
A)  equal to the rate paid by that country's government. 
B)  slightly higher than the rate paid by that country's government. 
C)  mostly influenced by the demand for and supply of long-term funds in that country. 
D)  set by the country's central bank.

Question 13

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 price entered by a competitive bidder 
D)  equally weighted average price paid by all competitive bidders whose bids were accepted. 
E)  none of the above 
A)  highest price entered by a competitive bidder. 
B)  highest price entered by a noncompetitive bidder. 
C)  lowest price entered by a competitive bidder 
D)  equally weighted average price paid by all competitive bidders whose bids were accepted. 
E)  none of the above

Question 14

An international interbank market facilitates the transfer of funds from banks with excess funds to those with deficient funds.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

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 the above 
A)  10,000 
B)  9,524 
C)  9,756 
D)  none of the above

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

The rate on Eurodollar floating-rate CDs is based on

Accepted Answer

A)  a weighted average of European prime rates. 
B)  the London Interbank Offer Rate. 
C)  the U.S. prime rate. 
D)  a weighted average of European discount rates. 
A)  a weighted average of European prime rates. 
B)  the London Interbank Offer Rate. 
C)  the U.S. prime rate. 
D)  a weighted average of European discount rates.

Question 19

Which money market transaction is most likely to represent a loan from one commercial bank to another?

Accepted Answer

A)  banker's acceptance 
B)  negotiable CD 
C)  federal funds 
D)  commercial paper 
A)  banker's acceptance 
B)  negotiable CD 
C)  federal funds 
D)  commercial paper

Question 20

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

Exam 6: Money Markets

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

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 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.

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

A ____ is not a money market security.

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

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 annualizedyield from this transaction?

Which of the following is sometimes issued in the primary market by nonfinancial firms to borrow funds?

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.

The LIBOR scandal in 2012 involved:

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.

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

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

An international interbank market facilitates the transfer of funds from banks with excess funds to those with deficient funds.

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

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 $____.

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

The rate on Eurodollar floating-rate CDs is based on

Which money market transaction is most likely to represent a loan from one commercial bank to another?

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.

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 Operations

Pension Fund Operations

Filters

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.