Question 1

____ is/are sold at an auction at a discount from par value.

Accepted Answer

A)  Treasury bills 
B)  Repurchase agreements 
C)  Banker's acceptances 
D)  Commercial paper 
A)  Treasury bills 
B)  Repurchase agreements 
C)  Banker's acceptances 
D)  Commercial paper

Question 2

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 3

In general, the money markets are widely perceived to be efficient in the sense that the prices reflect all available public information.

Accepted Answer

A) True 
 B)False

Question 4

When a firm sells its commercial paper at a ____ price than projected, its cost of raising funds will be ____ than what it initially anticipated.

Accepted Answer

A)  higher; higher 
B)  lower; lower 
C)  higher; lower 
D)  lower; higher 
E)  Answers C and D are correct. 
A)  higher; higher 
B)  lower; lower 
C)  higher; lower 
D)  lower; higher 
E)  Answers C and D are correct.

Question 5

There is no limit to the amount of T-bills that can be purchased by noncompetitive bidders in a T-bill auction.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A)  federal funds rate 
B)  discount rate 
C)  prime rate 
D)  repo rate 
A)  federal funds rate 
B)  discount rate 
C)  prime rate 
D)  repo rate

Question 7

Money market securities are must have a maturity of three months or less.

Accepted Answer

A) True 
 B)False

Question 8

Treasury bills

Accepted Answer

A)  have a maturity of up to five years. 
B)  have an active secondary market. 
C)  are commonly sold at par value. 
D)  commonly offer coupon payments. 
A)  have a maturity of up to five years. 
B)  have an active secondary market. 
C)  are commonly sold at par value. 
D)  commonly offer coupon payments.

Question 9

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 wouldplace ____ pressure on the yields of money market securities.

Accepted Answer

A)  weak; downward 
B)  weak; upward 
C)  strong; upward 
D)  none of the above 
A)  weak; downward 
B)  weak; upward 
C)  strong; upward 
D)  none of the above

Question 10

Securities with maturities of one year or less are classified as

Accepted Answer

A)  capital market instruments. 
B)  money market instruments. 
C)  preferred stock. 
D)  none of the above 
A)  capital market instruments. 
B)  money market instruments. 
C)  preferred stock. 
D)  none of the above

Question 11

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?

Accepted Answer

A)  8.62 percent 
B)  8.78 percent 
C)  8.90 percent 
D)  9.14 percent 
E)  9.00 percent 
A)  8.62 percent 
B)  8.78 percent 
C)  8.90 percent 
D)  9.14 percent 
E)  9.00 percent

____ is/are sold at an auction at a discount from par value.

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?

In general, the money markets are widely perceived to be efficient in the sense that the prices reflect all available public information.

When a firm sells its commercial paper at a price than projected, its cost of raising funds will be than what it initially anticipated.

There is no limit to the amount of T-bills that can be purchased by noncompetitive bidders in a T-bill auction.

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

Money market securities are must have a maturity of three months or less.

Treasury bills

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 wouldplace pressure on the yields of money market securities.

Securities with maturities of one year or less are classified as

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?

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

Exam 6: Money Markets

____ is/are sold at an auction at a discount from par value.

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?

In general, the money markets are widely perceived to be efficient in the sense that the prices reflect all available public information.

When a firm sells its commercial paper at a ____ price than projected, its cost of raising funds will be ____ than what it initially anticipated.

There is no limit to the amount of T-bills that can be purchased by noncompetitive bidders in a T-bill auction.

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

Money market securities are must have a maturity of three months or less.

Treasury bills

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 wouldplace ____ pressure on the yields of money market securities.

Securities with maturities of one year or less are classified as

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?

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

When a firm sells its commercial paper at a price than projected, its cost of raising funds will be than what it initially anticipated.

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 wouldplace pressure on the yields of money market securities.