FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 5: Money Markets

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 21

True/False

Review LaterAdd Note

Review Later

Everything else equal, an effective annual rate will be greater than the bond equivalent yield on the same security.

Correct Answer

verified

Show Answer

Question 22

Multiple Choice

Review LaterAdd Note

Review Later

The discount yield on a T-Bill differs from the T-bill's bond equivalent yield (BEY) because I. The discount yield is the return per dollar of face value and the BEY is a return per dollar originally invested. II. A 360-day year is used on the discount yield and the BEY uses 365 days. III. The discount yield is calculated without compounding, the BEY is calculated with compounding.

A) I only
B) II only
C) I and II only
D) II and III only
E) I, II, and III

Correct Answer

verified

Show Answer

Question 23

Multiple Choice

Review LaterAdd Note

A 90-day T-Bill is selling for $9,900. The par is $10,000. The effective annual return on the T-Bill is (watch your rounding)

In dollars outstanding in 2010 the largest money market security was

A dealer is quoting a $10,000 face 180-day T-Bill quoted at 2.75 bid, 2.65 ask. You could buy this bill at ______________ or sell it at _______________.

Euro commercial paper is a short-term obligation of the European Central Bank.

The largest secondary money market in the United States is the secondary market for T-Bills.

A government securities dealer needs to make a 7% pre-tax annual return on $10 million of capital employed to make it worthwhile to make a market in T-Bills. If the bid discount on $10,000 face value, ninety day T-Bills is 3.50%, and the dealer can expect to do 5200 round trip deals today what must the ask discount be? Hint: A round trip is a buy and a sell transaction.

360/h times the difference between the face value and the current value divided by the face value gives you the discount yield on an instrument.

You are a corporate treasurer for Esso Oil. The quoted rate on dollar denominated euro commercial paper has just blipped down recently. Your firm can issue $10 million of 180-day euro commercial paper in the London markets at 3.45%. You can also invest the proceeds in the United States in comparable maturity negotiable dollar-denominated CDs, which are quoting 3.95%. Ignoring any transactions costs, how much money, if any, can Esso make by borrowing in the euro markets and investing in the United States? Is this a good deal or not? Should you expect it to last? Explain.

The following formula is used to calculate the _____________ of a money market investment.

How does a banker's acceptance help create more international trade?

A short-term unsecured promissory note issued by a company is

Why do most money market securities have large denominations?

A negotiable CD

A time draft payable to a seller of goods, with payment guaranteed by a bank is a

The bond equivalent yield times 365/360 is equal to the single payment yield.

A banker's acceptance is

Rates on federal funds and repurchase agreements are stated

From 1990 to 2010, which one of the following money market securities actually declined in terms of dollar amount outstanding?