Review topics for Exam 2.docx - Chapter 6: 1. What are...

Chapter 6:
1. What are money market securities?
2. You should know the basic characteristics of the following securities: T-bills,
commercial paper, negotiable certificates of deposit, repurchase agreements,
federal funds, bankers’ acceptances. Definition of these securities (especially,
what is the riskiness of the security relative to treasury securities), who issues
them? Who invests in these securities? Are they traded in the secondary market?
3. How are T-bills priced?
4. Calculate and define the yield and discount on T-bills. (formulas provided)
5. Calculate the yield on commercial paper, NCDs, and repurchase agreements
(formulas provided)
6. Describe the process of bankers’ acceptances. When are they used? How are they
used by the importing firm, the exporting firm, the commercial banks, and the
investors?
7. What factors affect the yields on different securities?