Question 1

Which of the following statements are true of Treasury bills?

Accepted Answer

A)   The market for Treasury bills is extremely deep and liquid.
B)   Occasionally, investors find that earnings on T-bills do not compensate them for changes in purchasing power due to inflation.
C)   By volume, most Treasury bills are sold to individuals who submit noncompetitive bids.
D)   All of the above are true.
E)   Only A and B of the above are true.

Question 2

Commercial paper securities are unsecured promissory notes,issued by corporations,that mature in no more than 270 days.

Accepted Answer

A) True 
 B)False

Question 3

Activity in money markets increased significantly in the late 1970s and early 1980s because of

Accepted Answer

A)   rising short-term interest rates.
B)   regulations that limited what banks could pay for deposits.
C)   both A and B of the above.
D)   neither A nor B of the above.

Question 4

Eurodollars

Accepted Answer

A)   are time deposits with fixed maturities and are, therefore, somewhat illiquid.
B)   may offer the borrower a lower interest rate than can be received in the domestic market.
C)   are limited to London banks.
D)   are all of the above.
E)   are only A and B of the above.

Question 5

When inflation rose in the late 1970s,

Accepted Answer

A)   consumers moved money out of money market mutual funds because their returns did not keep pace with inflation.
B)   banks solidified their advantage over money markets by offering higher deposit rates.
C)   brokerage houses introduced highly popular money market mutual funds, which drew significant amounts of money out of bank deposits.
D)   consumers were unable to take advantage of higher rates in money markets because of the requirement of large transaction sizes.

Question 6

Explain how and why repurchase agreements would be used.

Accepted Answer

Repurchase agreements, also known as repos, are a type of short-term borrowing where one party sells securities to another party with a promise to buy them back at a later date. This type of arrangement is commonly used in the financial markets as a way for banks and other financial institutions to raise short-term funds.

There are several reasons why repurchase agreements would be used. Firstly, they provide a source of short-term liquidity for financial institutions. By using repos, these institutions can quickly raise cash to meet their funding needs without having to sell off their securities holdings.

Secondly, repurchase agreements are used as a way to manage the supply of money in the financial system. When the central bank conducts open market operations, it can use repos to inject or withdraw liquidity from the market, which can help influence short-term interest rates.

Additionally, repurchase agreements can be used as a way for investors to earn a return on their cash holdings. By entering into a repo agreement, investors can lend their cash to a counterparty in exchange for interest income, with the securities serving as collateral to protect against default.

Overall, repurchase agreements are a versatile tool used in the financial markets for managing liquidity, influencing interest rates, and generating returns on cash holdings.

Question 7

The term money market is actually a misnomer,because liquid securities are traded in these markets rather than money.

Accepted Answer

A) True 
 B)False

Question 8

The U.S.Treasury Department is the single most influential participant in the U.S.money market.

Accepted Answer

A) True 
 B)False

Question 9

Money markets are used extensively by businesses both to warehouse surplus funds and to raise short-term funds.

Accepted Answer

A) True 
 B)False

Question 10

The usual maturity range for commercial paper is ________.

Accepted Answer

A)   1 to 270 days
B)   1 to 15 days
C)   4, 13, and 26 weeks
D)   1 to 7 days

Question 11

Money market instruments issued by the U.S.Treasury are called

Accepted Answer

A)   Treasury bills.
B)   Treasury notes.
C)   Treasury bonds.
D)   Treasury strips.

Question 12

The Treasury accepts noncompetitive bids in ascending order of yield until the accepted bids reach the offering amount.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A)   Most money market securities do not pay interest. Instead, the investor pays less for the security than it will be worth when it matures.
B)   Pension funds invest a portion of their assets in the money market to have sufficient liquidity to meet their obligations.
C)   Unlike most participants in the money market, the U.S. Treasury Department is always a demander of money market funds and never a supplier.
D)   All of the above are true.
E)   Only A and B of the above are true.

Question 14

The size of the asset-backed commercial paper market nearly doubled between 2004 and 2007 to about $1 trillion.Discuss how the subprime meltdown and collapse of the ABCP market almost led to the collapse of the money market mutual fund market as well.

Accepted Answer

Before discussing how subprime meltdown ...

Question 15

What are the main characteristics of money market securities?

Accepted Answer

1.
Shorter maturity i.e., one year or le...

Question 16

The T-bill is not an investment to be used for anything but temporary storage of excess funds because it barely keeps up with inflation.

Accepted Answer

A) True 
 B)False  True

Question 17

Suppose that you purchase a 182-day Treasury bill for $9,850 that is worth $10,000 when it matures.The security's annualized yield if held to maturity is about

Accepted Answer

A)   1.5%.
B)   2%.
C)   3%.
D)   6%. C

Question 18

Negotiable certificates of deposit

Accepted Answer

A)   are bearer instruments because their holders earn the interest and principal at maturity.
B)   typically have a maturity of one to four months.
C)   are usually denominated at $100,000.
D)   are all of the above.
E)   are only A and B of the above.

Question 19

Explain why the money markets are referred to as wholesale markets.

Accepted Answer

The money markets are referred to as who...

Question 20

What are the major types of securities and who are the major participants in the money markets?

Accepted Answer

Types of Money Market Instruments
A larg...

Exam 11: The Money Markets

Which of the following statements are true of Treasury bills?

Correct Answer
verified

Commercial paper securities are unsecured promissory notes,issued by corporations,that mature in no more than 270 days.

Correct Answer
verified

Activity in money markets increased significantly in the late 1970s and early 1980s because of

Correct Answer
verified

Eurodollars

Correct Answer
verified

When inflation rose in the late 1970s,

Correct Answer
verified

Explain how and why repurchase agreements would be used.

The term money market is actually a misnomer,because liquid securities are traded in these markets rather than money.

Correct Answer
verified

The U.S.Treasury Department is the single most influential participant in the U.S.money market.

Correct Answer
verified

Money markets are used extensively by businesses both to warehouse surplus funds and to raise short-term funds.

Correct Answer
verified

The usual maturity range for commercial paper is ________.

Correct Answer
verified

Money market instruments issued by the U.S.Treasury are called

Correct Answer
verified

The Treasury accepts noncompetitive bids in ascending order of yield until the accepted bids reach the offering amount.

Correct Answer
verified

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

Correct Answer
verified

The size of the asset-backed commercial paper market nearly doubled between 2004 and 2007 to about $1 trillion.Discuss how the subprime meltdown and collapse of the ABCP market almost led to the collapse of the money market mutual fund market as well.

Correct Answer
verified
Before discussing how subprime meltdown ...
View Answer

What are the main characteristics of money market securities?

Correct Answer
verified
1.
Shorter maturity i.e., one year or le...
View Answer

The T-bill is not an investment to be used for anything but temporary storage of excess funds because it barely keeps up with inflation.

Correct Answer
verified
True

Suppose that you purchase a 182-day Treasury bill for $9,850 that is worth $10,000 when it matures.The security's annualized yield if held to maturity is about

Correct Answer
verified
C

Negotiable certificates of deposit

Correct Answer
verified

Explain why the money markets are referred to as wholesale markets.

Correct Answer
Answered by ExamLex AI
The money markets are referred to as who...
View Answer

What are the major types of securities and who are the major participants in the money markets?

Correct Answer
verified
Types of Money Market Instruments
A larg...
View Answer

Exam 11: The Money Markets

Which of the following statements are true of Treasury bills?

Correct AnswerverifiedShow Answer

Commercial paper securities are unsecured promissory notes,issued by corporations,that mature in no more than 270 days.

Correct AnswerverifiedShow Answer

Activity in money markets increased significantly in the late 1970s and early 1980s because of

Correct AnswerverifiedShow Answer

Eurodollars

Correct AnswerverifiedShow Answer

When inflation rose in the late 1970s,

Correct AnswerverifiedShow Answer

Explain how and why repurchase agreements would be used.

The term money market is actually a misnomer,because liquid securities are traded in these markets rather than money.

Correct AnswerverifiedShow Answer

The U.S.Treasury Department is the single most influential participant in the U.S.money market.

Correct AnswerverifiedShow Answer

Money markets are used extensively by businesses both to warehouse surplus funds and to raise short-term funds.

Correct AnswerverifiedShow Answer

The usual maturity range for commercial paper is ________.

Correct AnswerverifiedShow Answer

Money market instruments issued by the U.S.Treasury are called

Correct AnswerverifiedShow Answer

The Treasury accepts noncompetitive bids in ascending order of yield until the accepted bids reach the offering amount.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The size of the asset-backed commercial paper market nearly doubled between 2004 and 2007 to about $1 trillion.Discuss how the subprime meltdown and collapse of the ABCP market almost led to the collapse of the money market mutual fund market as well.

Correct AnswerverifiedBefore discussing how subprime meltdown ...View AnswerShow Answer

What are the main characteristics of money market securities?

Correct Answerverified1.Shorter maturity i.e., one year or le...View AnswerShow Answer

The T-bill is not an investment to be used for anything but temporary storage of excess funds because it barely keeps up with inflation.

Correct AnswerverifiedTrue

Suppose that you purchase a 182-day Treasury bill for $9,850 that is worth $10,000 when it matures.The security's annualized yield if held to maturity is about

Correct AnswerverifiedC

Negotiable certificates of deposit

Correct AnswerverifiedShow Answer

Explain why the money markets are referred to as wholesale markets.

Correct AnswerAnswered by ExamLex AIThe money markets are referred to as who...View AnswerShow Answer

What are the major types of securities and who are the major participants in the money markets?

Correct AnswerverifiedTypes of Money Market InstrumentsA larg...View AnswerShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Before discussing how subprime meltdown ...
View Answer

Correct Answer
verified
1.
Shorter maturity i.e., one year or le...
View Answer

Correct Answer
verified
True

Correct Answer
verified
C

Correct Answer
verified

Correct Answer
Answered by ExamLex AI
The money markets are referred to as who...
View Answer

Correct Answer
verified
Types of Money Market Instruments
A larg...
View Answer