Question 1

Commercial paper rates:

Accepted Answer

A)  Fluctuate between extreme highs and lows 
B)  Are relatively easy to predict 
C)  It is highly volatile 
D)  All of the above 
E)  A and C above

Question 2

Shortage of information on the condition of banks can adversely affect the volume of trading and interest rates prevailing in the interbank market for reserves.

Accepted Answer

A) True 
 B)False

Question 3

Bankers acceptances are considered prime quality instruments comparable to:

Accepted Answer

A)  Prime negotiable bank CDs 
B)  U.S. Treasury bills 
C)  Prime commercial paper 
D)  All of the above 
E)  None of the above

Question 4

Which of the following is not a commercial paper rating agency?

Accepted Answer

A)  Moody's Investors Service 
B)  Standard & Poor's Corporation 
C)  McHall Rating Service 
D)  Fitch Ratings 
E)  None of the above

Question 5

The market for negotiable CDs is segmented into two segments - prime and nonprime.

Accepted Answer

A) True 
 B)False

Question 6

Exactly how is the rate of return on commercial paper figured? Is the method used to determine paper's rate of return similar to the return calculation for any other money market instrument? Which one?

Accepted Answer

The answer of Exactly how is the rate of return...

Question 7

The commercial paper market represents a way for small, relatively new firms to raise short term funds, before they have had the opportunity to build a good relationship with a bank.

Accepted Answer

A) True 
 B)False

Question 8

A bank deposit developed in 1966 which can carry maturities longer than one year with an interest rate that may be adjusted every 3 to 6 months to match changes in LIBOR is known as the:

Accepted Answer

A)  Asian dollar CD 
B)  Term CD 
C)  Chartered Bank CD 
D)  Eurodollar CD 
E)  None of the above

Question 9

What exactly is a bankers acceptance? What is the meaning of the word "accepted"?

Accepted Answer

The answer of What exactly is a bankers acceptance? What...

Question 10

One advantage of CDs issued in registered form, as opposed to bearer CDs, is that registered CDs are more convenient for resale in the secondary market.

Accepted Answer

A) True 
 B)False

Question 11

Adjustable-rate CDs are financial instruments that:

Accepted Answer

A)  May extend up to 36 months and maturity 
B)  Vary with interest rates 
C)  may have renegotiated interest rates 
D)  A and C above 
E)  None of the above

Question 12

Federal funds consist exclusively of those reserve balances held at the Federal Reserve banks.

Accepted Answer

A) True 
 B)False

Question 13

A tightening of the Federal Reserve's monetary policy would be indicated by:

Accepted Answer

A)  Lowering the interest rate 
B)  Lowering the Fed funds rate 
C)  Raising the interest rate 
D)  Raising the Fed funds rate 
E)  None of the above

Question 14

Provincial bills are issued by local governments in Great Britain.

Accepted Answer

A) True 
 B)False

Question 15

The current auction method used by the U.S. Treasury encourages competitive bidders to bid low.

Accepted Answer

A) True 
 B)False

Question 16

Adjustable-rate CDs may extend up to 36 months in maturity and allow the investor to renegotiate the interest rate once during the life of the CD.

Accepted Answer

A) True 
 B)False

Question 17

Using the the description or the definition below, identify the key terms or concepts discussed in this chapter
 a. A short-term debt security issued by a corporation with a superior credit rating. 
b. Commercial paper sold directly to investors without the aid of a broker or dealer. 
c. Commercial paper sold through security dealers.
d. Financial devices used to upgrade the credit rating of a borrower.
e. Continuous borrowing agreement involving the daily issuance of commercial paper.

Accepted Answer

The answer of Using the the description or the definition...

Question 18

According to your text, the negotiable CD is one of the oldest of all American money market instruments.

Accepted Answer

A) True 
 B)False

Question 19

The decline in bankers acceptances is due to:

Accepted Answer

A)  International firms becoming less of a credit risk 
B)  Greater utilization of foreign currencies in international transactions 
C)  Greater reliance on direct bank loans by major exporters and importers 
D)  A shift by international corporations away from banks and toward the open market 
E)  B, C and D above

Question 20

CD yields as quoted in the American money market are computed by the bank discount method.

Accepted Answer

A) True 
 B)False

Exam 11: Exploring the Reserve Accounting System, Money Markets, and Financial Instruments

Commercial paper rates:

Shortage of information on the condition of banks can adversely affect the volume of trading and interest rates prevailing in the interbank market for reserves.

Bankers acceptances are considered prime quality instruments comparable to:

Which of the following is not a commercial paper rating agency?

The market for negotiable CDs is segmented into two segments - prime and nonprime.

Exactly how is the rate of return on commercial paper figured? Is the method used to determine paper's rate of return similar to the return calculation for any other money market instrument? Which one?

The commercial paper market represents a way for small, relatively new firms to raise short term funds, before they have had the opportunity to build a good relationship with a bank.

A bank deposit developed in 1966 which can carry maturities longer than one year with an interest rate that may be adjusted every 3 to 6 months to match changes in LIBOR is known as the:

What exactly is a bankers acceptance? What is the meaning of the word "accepted"?

One advantage of CDs issued in registered form, as opposed to bearer CDs, is that registered CDs are more convenient for resale in the secondary market.

Adjustable-rate CDs are financial instruments that:

Federal funds consist exclusively of those reserve balances held at the Federal Reserve banks.

A tightening of the Federal Reserve's monetary policy would be indicated by:

Provincial bills are issued by local governments in Great Britain.

The current auction method used by the U.S. Treasury encourages competitive bidders to bid low.

Adjustable-rate CDs may extend up to 36 months in maturity and allow the investor to renegotiate the interest rate once during the life of the CD.

According to your text, the negotiable CD is one of the oldest of all American money market instruments.

The decline in bankers acceptances is due to:

CD yields as quoted in the American money market are computed by the bank discount method.