Question 1

Commercial banks are large holders of ________ and are the major issuer of ________.

Accepted Answer

A)  negotiable certificates of deposit; U.S. government securities 
B)  U.S. government securities; negotiable certificates of deposit 
C)  commercial paper; Eurodollars 
D)  Eurodollars; commercial paper 
A)  negotiable certificates of deposit; U.S. government securities 
B)  U.S. government securities; negotiable certificates of deposit 
C)  commercial paper; Eurodollars 
D)  Eurodollars; commercial paper

Question 2

If your competitive bid for a Treasury bill is successful,then you will

Accepted Answer

A)  certainly pay less than if you had submitted a noncompetitive bid. 
B)  probably pay more than if you had submitted a noncompetitive bid. 
C)  pay the average of prices offered in other successful competitive bids. 
D)  pay the same as other successful competitive bidders. 
A)  certainly pay less than if you had submitted a noncompetitive bid. 
B)  probably pay more than if you had submitted a noncompetitive bid. 
C)  pay the average of prices offered in other successful competitive bids. 
D)  pay the same as other successful competitive bidders.

Question 3

If your noncompetitive bid for a Treasury bill is successful,then you will

Accepted Answer

A)  certainly pay less than if you had submitted a competitive bid. 
B)  certainly pay more than if you had submitted a competitive bid. 
C)  pay the average of prices offered in other noncompetitive bids. 
D)  pay the same as other successful noncompetitive bidders. 
A)  certainly pay less than if you had submitted a competitive bid. 
B)  certainly pay more than if you had submitted a competitive bid. 
C)  pay the average of prices offered in other noncompetitive bids. 
D)  pay the same as other successful noncompetitive bidders.

Question 4

Explain why banks,which would seem to have a comparative advantage in gathering information,have not eliminated the need for the money markets.

Accepted Answer

Owing to the need to retain liquidity ra

Question 5

Federal funds

Accepted Answer

A)  are short-term funds transferred between financial institutions, usually for a period of one day. 
B)  actually have nothing to do with the federal government. 
C)  provide banks with an immediate infusion of reserves. 
D)  are all of the above. 
E)  are only A and B of the above. 
A)  are short-term funds transferred between financial institutions, usually for a period of one day. 
B)  actually have nothing to do with the federal government. 
C)  provide banks with an immediate infusion of reserves. 
D)  are all of the above. 
E)  are only A and B of the above.

Question 6

A banker's acceptance is an order to pay a specified amount of money to the bearer on a given date.Banker's acceptances have been used since the twelfth century.

Accepted Answer

A) True 
 B)False

Question 7

Treasury bills do not

Accepted Answer

A)  pay interest. 
B)  have a maturity date. 
C)  have a face amount. 
D)  have an active secondary market. 
A)  pay interest. 
B)  have a maturity date. 
C)  have a face amount. 
D)  have an active secondary market.

Question 8

The most influential participant(s)in the U.S.money market

Accepted Answer

A)  is the Federal Reserve. 
B)  is the U.S. Treasury Department. 
C)  are the large money center banks. 
D)  are the investment banks that underwrite securities. 
A)  is the Federal Reserve. 
B)  is the U.S. Treasury Department. 
C)  are the large money center banks. 
D)  are the investment banks that underwrite securities.

Question 9

The main purpose of federal funds is to provide banks with an immediate infusion of reserves should they be short.

Accepted Answer

A) True 
 B)False

Question 10

Finance companies play a unique role in money markets by

Accepted Answer

A)  giving consumers indirect access to money markets. 
B)  combining consumers' investments to purchase money market securities on their behalf. 
C)  borrowing in capital markets to finance purchases of money market securities. 
D)  assisting the government in its sales of U.S. Treasury securities. 
A)  giving consumers indirect access to money markets. 
B)  combining consumers' investments to purchase money market securities on their behalf. 
C)  borrowing in capital markets to finance purchases of money market securities. 
D)  assisting the government in its sales of U.S. Treasury securities.

Question 11

Banker's acceptances

Accepted Answer

A)  can be bought and sold until they mature. 
B)  are issued only by large money center banks. 
C)  carry low interest rates because of the very low default risk. 
D)  are all of the above. 
E)  are only A and B of the above. 
A)  can be bought and sold until they mature. 
B)  are issued only by large money center banks. 
C)  carry low interest rates because of the very low default risk. 
D)  are all of the above. 
E)  are only A and B of the above.

Question 12

The primary function of large diversified brokerage firms in the money market is to

Accepted Answer

A)  sell money market securities to the Federal Reserve for its open market operations. 
B)  make a market for money market securities by maintaining an inventory from which to buy or sell. 
C)  buy money market securities from corporations that need liquidity. 
D)  buy T-bills from the U.S. Treasury Department. 
A)  sell money market securities to the Federal Reserve for its open market operations. 
B)  make a market for money market securities by maintaining an inventory from which to buy or sell. 
C)  buy money market securities from corporations that need liquidity. 
D)  buy T-bills from the U.S. Treasury Department.

Question 13

Which of the following are true statements about participants in the money markets?

Accepted Answer

A)  Large banks participate in the money markets by selling large negotiable CDs. 
B)  The U.S. government and corporations borrow in the money markets because cash inflows and outflows are rarely synchronized. 
C)  The Federal Reserve is the single most influential participant in the U.S. money market. 
D)  All of the above are true. 
E)  Only A and B of the above are true. 
A)  Large banks participate in the money markets by selling large negotiable CDs. 
B)  The U.S. government and corporations borrow in the money markets because cash inflows and outflows are rarely synchronized. 
C)  The Federal Reserve is the single most influential participant in the U.S. money market. 
D)  All of the above are true. 
E)  Only A and B of the above are true.

Question 14

Two important characteristics of any financial market are flexibility and

Accepted Answer

A)  risk. 
B)  innovation. 
C)  tolerance. 
D)  capital. 
A)  risk. 
B)  innovation. 
C)  tolerance. 
D)  capital.

Question 15

The U.S.Treasury Department is the single largest borrower in the U.S.money market.

Accepted Answer

A) True 
 B)False

Question 16

A negotiable certificate of deposit

Accepted Answer

A)  is a term security because it has a specified maturity date. 
B)  is a bearer instrument, meaning whoever holds the certificate at maturity receives the principal and interest. 
C)  can be bought and sold until maturity. 
D)  all of the above. 
E)  only A and B of the above. 
A)  is a term security because it has a specified maturity date. 
B)  is a bearer instrument, meaning whoever holds the certificate at maturity receives the principal and interest. 
C)  can be bought and sold until maturity. 
D)  all of the above. 
E)  only A and B of the above.

Question 17

Which of the following statements about money market securities are true?

Accepted Answer

A)  The interest rates on all money market instruments move very closely together over time. 
B)  The secondary market for Treasury bills is extensive and well developed. 
C)  There is no well-developed secondary market for commercial paper. 
D)  All of the above are true. 
E)  Only A and B of the above are true. 
A)  The interest rates on all money market instruments move very closely together over time. 
B)  The secondary market for Treasury bills is extensive and well developed. 
C)  There is no well-developed secondary market for commercial paper. 
D)  All of the above are true. 
E)  Only A and B of the above are true.

Question 18

The main role of investment companies in the money market is to

Accepted Answer

A)  trade on behalf of commercial accounts. 
B)  mediate the symmetric information problem between server-lender and borrower-spenders. 
C)  both A and B of the above. 
D)  neither A nor B of the above. 
A)  trade on behalf of commercial accounts. 
B)  mediate the symmetric information problem between server-lender and borrower-spenders. 
C)  both A and B of the above. 
D)  neither A nor B of the above.

Question 19

A banker's acceptance is

Accepted Answer

A)  used to finance goods that have not yet been transferred from the seller to the buyer. 
B)  an order to pay a specified amount of money to the bearer on a given date. 
C)  a relatively new money market security that arose in the 1960s as international trade expanded. 
D)  all of the above. 
E)  only A and B of the above. 
A)  used to finance goods that have not yet been transferred from the seller to the buyer. 
B)  an order to pay a specified amount of money to the bearer on a given date. 
C)  a relatively new money market security that arose in the 1960s as international trade expanded. 
D)  all of the above. 
E)  only A and B of the above.

Exam 11: The Money Markets

Commercial banks are large holders of ________ and are the major issuer of ________.

If your competitive bid for a Treasury bill is successful,then you will

If your noncompetitive bid for a Treasury bill is successful,then you will

Explain why banks,which would seem to have a comparative advantage in gathering information,have not eliminated the need for the money markets.

Federal funds

A banker's acceptance is an order to pay a specified amount of money to the bearer on a given date.Banker's acceptances have been used since the twelfth century.

Treasury bills do not

The most influential participant(s)in the U.S.money market

The main purpose of federal funds is to provide banks with an immediate infusion of reserves should they be short.

Finance companies play a unique role in money markets by

Banker's acceptances

The primary function of large diversified brokerage firms in the money market is to

Which of the following are true statements about participants in the money markets?

Two important characteristics of any financial market are flexibility and

The U.S.Treasury Department is the single largest borrower in the U.S.money market.

A negotiable certificate of deposit

Which of the following statements about money market securities are true?

The main role of investment companies in the money market is to

A banker's acceptance is

Why Study Financial Markets and Institutions?

Overview of the Financial System

What Do Interest Rates Mean and What Is Their Role in Valuation?

Why Do Interest Rates Change?

How Do Risk and Term Structure Affect Interest Rates?

Are Financial Markets Efficient?

Why Do Financial Institutions Exist?

Why Do Financial Crises Occur and

Central Banks and the Federal Reserve System

Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics

The Bond Market

The Stock Market

The Mortgage Markets

The Foreign Exchange Market

The International Financial System

Banking and the Management of Financial Institutions

Financial Regulation

Banking Industry: Structure and Competition

The Mutual Fund Industry

Insurance Companies and Pension Funds

Investment Banks, Security Brokers and Dealers, and Venture Capital Firms

Risk Management in Financial Institutions

Hedging with Financial Derivatives

Financial Crises In Emerging Market Economies

Savings Associations and Credit Unions

Finance Companies

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Commercial banks are large holders of and are the major issuer of .