Money Markets

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Question 1

Free

Multiple Choice

Securities with maturities of one year or less are classified as

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capital market instruments.

money market instruments.

preferred stock.

none of the above

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Question 2

Free

Multiple Choice

Which of the following is not a money market security?

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Treasury bill

negotiable certificate of deposit

common stock

federal funds

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Question 3

Free

Multiple Choice

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

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Treasury bills

Repurchase agreements

Banker's acceptances

Commercial paper

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Question 4

Free

Multiple Choice

Jarrod King, a private investor, purchases a Treasury bill with a $10,000 par value for $9,645. One hundred days later, Jarrod sells the T-bill for $9,719. What is Jarrod's expected annualizedyield from this transaction?

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13.43 percent

2.78 percent

10.55 percent

2.80 percent

none of the above

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Question 5

Free

Multiple Choice

Assume investors require a 5 percent annualized return on a six-month T-bill with a par value of $10,000. The price investors would be willing to pay is $ ____ .

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10,000

9,524

9,756

none of the above

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Question 6

Multiple Choice

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?

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10.26 percent

0.26 percent

$2,500

10.00 percent

11.00 percent

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Question 7

Multiple Choice

Large corporations typically make ____ bids for T-bills so they can purchase larger amounts.

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competitive

noncompetitive

very small

none of the above

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Question 8

Multiple Choice

At any given time, the yield on commercial paper is ____ the yield on a T-bill with the same maturity.

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slightly less than

slightly higher than

equal to

A and B both occur with about equal frequency

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Question 9

Multiple Choice

T-bills and commercial paper are sold

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with a stated coupon rate.

at a discount from par value.

at a premium about par value.

A and C

none of the above

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Question 10

Multiple Choice

Commercial paper has a maximum maturity of ____ days.

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270

360

none of the above

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Question 11

Multiple Choice

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?

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8.62 percent

8.78 percent

8.90 percent

9.14 percent

9.00 percent

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Question 12

Multiple Choice

A firm plans to issue 30-day commercial paper for $9,900,000. Par value is $10,000,000. What is the firm's cost of borrowing?

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12.12 percent

11.11 percent

13.00 percent

14.08 percent

15.25 percent

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Question 13

Multiple Choice

Which of the following is not a money market instrument?

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banker's acceptance

commercial paper

negotiable CDs

repurchase agreements

All of the above are money market instruments.

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Question 14

Multiple Choice

A repurchase agreement calls for an investor to buy securities for $4,925,000 and sell them back in 60 days for $5,000,000. What is the yield?

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9.43 percent

9.28 percent

9.14 percent

9.00 percent

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Question 15

Multiple Choice

The federal funds market allows depository institutions to borrow

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short-term funds from each other.

short-term funds from the Treasury.

long-term funds from each other.

long-term funds from the Federal Reserve.

B and D

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Question 16

Multiple Choice

When a bank guarantees a future payment to a firm, the financial instrument used is called

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a repurchase agreement.

a negotiable CD.

a banker's acceptance.

commercial paper.

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Question 17

Multiple Choice

Which of the following is true of money market instruments?

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Their yields are highly correlated over time.

They typically sell for par value when they are initially issued (especially T-bills and commercial paper).

Treasury bills have the highest yield.

They all make periodic coupon (interest) payments.

A and B

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Question 18

Multiple Choice

An investor purchased an NCD a year ago in the secondary market for $980,000. She redeems it today and receives $1,000,000. She also receives interest of $30,000. The investor's annualized yieldon this investment is

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2.0 percent.

5.10 percent.

5.00 percent.

2.04 percent.

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Question 19

Multiple Choice

An investor initially purchased securities at a price of $9,923,418, with an agreement to sell them back at a price of $10,000,000 at the end of a 90-day period. The repo rate is ____ percent.

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3.1

0.77

none of the above

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Question 20

Multiple Choice

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

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federal funds rate

discount rate

prime rate

repo rate

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