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Chap002 (1) - Multiple Choice Questions 1 Which of the...

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Multiple Choice Questions 1. Which of the following is not a characteristic of a money market instrument? A) liquidity B) marketability C) long maturity D) liquidity premium E) C and D Answer: E Difficulty: Easy Rationale: Money market instruments are short-term instruments with high liquidity and marketability; they do not have long maturities nor pay liquidity premiums. 2. Which one of the following is not a money market instrument? 3. T-bills are financial instruments initially sold by ________ to raise funds. A) commercial banks B) the U. S. government C) state and local governments D) agencies of the federal government E) B and D Answer: B Difficulty: Easy Rationale: Only the U. S. government sells T-bills in the primary market.
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4. The bid price of a T-bill in the secondary market is 5. Commercial paper is a short-term security issued by ________ to raise funds. 6. Which one of the following terms best describes Eurodollars: A) dollar-denominated deposits in European banks. B) dollar-denominated deposits at branches of foreign banks in the U. S. C) dollar-denominated deposits at foreign banks and branches of American banks outside the U. S. D) dollar-denominated deposits at American banks in the U. S. E) dollars that have been exchanged for European currency. Answer: C Difficulty: Moderate Rationale: Although originally Eurodollars were used to describe dollar-denominated deposits in European banks, today the term has been extended to apply to any dollar- denominated deposit outside the U. S.
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Chapter 2 Asset Classes and Financial Investments
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