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 costof borrowing is estimated to be ____ percent.

Eurodollar deposits

The minimum denomination of commercial paper is

During periods of uncertainty about the economy, there is a shift from risky money market securities to Treasury securities.

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

At any given time, the yield on commercial paper is ____ the yield on a T-bill with the same maturity.

____ are the most active participants in the federal funds market.

The federal funds market allows depository institutions to borrow

When an investor purchases a six-month (182-day) T-bill with a $10,000 par value for $9,700, the Treasury bill discount is ____ percent.

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

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

LIBOR is:

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).

Robbins Corp. frequently invests excess funds in the Mexican money market. One year ago, Robbins invested in a one-year Mexican money market security that provided a yield of 25 percent. At theend of the year, when Robbins converted the Mexican pesos to dollars, the peso had depreciated from $.12 to $.11. What is the effective yield earned by Robbins?

T-bills and commercial paper are sold

Money market securities are issued in the primary market through a telecommunications network by the Treasury, corporations, and financial intermediaries that wish to obtain short-term financing.

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.

Commercial paper is

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

Commercial paper is subject to: