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HW_5_Questions_Chapters_9_10_11[1] - HW 5 Questions Chapter...

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HW 5 Questions Chapter 9 1. What characteristics define the money markets? 2. Distinguish between competitive bidding and non-competitive bidding for Treasury securities. 3. Who issues federal funds, and what is the usual purpose of these funds? 4. Who issues commercial paper and for what purpose? 5. What is the annualized discount rate % and your annualized investment rate % on a Treasury bill that you purchase for $9,940 that will mature in 91 days for $10,000? 6. The price of 182-day commercial paper is $7,840. If the annualized investment rate is 4.093%, what will the paper pay at maturity? 7. In a Treasury auction of $2.1 billion par value 91-day T-bills, the following bids were submitted: Bidder Bid Amount Price 1 $500 million $0.9940 2 $750 million $0.9901 3 $1.5 billion $0.9925 4 $1 billion $0.9936 5 $600 million $0.9939 If only these competitive bids are received, who will receive T-bills, in what quantity, and at what price? Chapter 10 1. The U.S. Treasury issues bills, notes, and bonds. How do these securities differ? 2. As interest rates in the market change over time, the market price of bonds rises and falls. What is this risk called? 3. What is a call provision? What are the disadvantages for the investors? Why do issuers issue callable bonds?
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