Financial Markets and Institutions Test 3 Review

Financial Markets and Institutions Test 3 Review - Bid...

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Financial Markets and Institutions Test 3 Review Fed Funds Most liquid of all financial assets. The interest rate for repos is lower than the fed funds rate, since repos are backed by securities (usually T-bills, T-bonds, or federal agency debt). The money market is comprised of dealers who issue and make the market in securities. Banker’s acceptances are bank liabilities. A repurchase agreement is a secured obligation. The money market is a market where liquidity is bought and sold. Brokers bring buyers and sellers together. T-Bill is the money market instrument with the lowest yield to the investor. Holding Period Return= (SP-PP/PP) x (365/n) Discount Rate/yield= yd= (Par-Price/Par) x (360/n) The max non-competitive bid is $1 million.
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Unformatted text preview: Bid Price= Par Value- Bid yield Discount in Dollars Bid Yield Discount in Dollars= Par Value x Discount Rate (as Decimal) x Remaining Days to Maturity. Dealers Spread= Dealers Ask Price- Dealers Bid Price T-bills are issued by the government to cover deficits and to refinance maturing government debt. Unlike T-Bills; T-Notes and T-Bonds are coupon instruments. Credit Enhancements lower costs to issuers and default risk to investors. Capital Markets can be either debt or equity; all money markets instruments are debt securities. Tax exempt bonds the before tax return equals the after tax return. When Interest rates are low people refinance their mortgages....
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Financial Markets and Institutions Test 3 Review - Bid...

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