ch2_outline - Investment Analysis Chapter 2 I The Money...

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Investment Analysis Chapter 2 I. The Money Market a. Subsector of the debt market b. Treasury bills i. Most marketable ii. Bid-asked spread is the difference in the buy and sell prices, which is the dealer’s source of profit iii. Minimum $1000 iv. 1, 3, and 6 month maturities v. state and local tax exemption c. CDs i. FDIC insured (up to $100k) ii. Virtually no secondary market trading (>$100k) iii. Time deposit d. Banker’s Acceptances i. An order to a bank by a customer to pay a sum of money at a future date e. Commerical Paper i. <270 days to avoid SEC regulation ii. secondary market trading f. Eurodollars i. Dollar-denominated deposits at foreign banks or foreign branches of American banks g. Repos i. Typically overnight ii. Dealer sells securities to an investor with an agreement to buy back those securities the next day at a slightly higher price iii. Provides liquidity iv. Reverse repo: buy securities with an agreement to sell back h. Broker’s calls i. Federal Funds i. Funds in the accounts of commercial banks at the Fed ii. Fed funds rate: rate at which banks lend to one another j. LIBOR i. Lending rate among banks in the London market ii. The premier short-term interest rate quoted in the European money market iii. Quoted in U.S. dollars and other currencies iv. 1, 3, 6, and 12 month v. Used as a reference rate (sways, ARMs, etc.)
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This note was uploaded on 05/10/2010 for the course FIN 3504 taught by Professor Staff during the Fall '08 term at University of Central Florida.

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ch2_outline - Investment Analysis Chapter 2 I The Money...

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