Ch05 - Chapter 5 Money Markets True/False Questions 1....

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 5 Money Markets True/False Questions 1. Everything else equal, an effective annual rate will be greater than the bond equivalent yield on the same security. Answer: True Page: 125 Level: Easy 2. Money markets exist to help reduce the opportunity cost of holding cash balances. Answer: True Page: 123 Level: Easy 3. The majority of money market securities are low denomination, low risk investments designed to appeal to individual investors with excess cash. Answer: False Page: 123 Level: Easy 4. Most money market securities are initially sold to individual investors. Answer: False Page: 123 Level: Easy 5. Commercial paper, negotiable certificates of deposit and banker's acceptance rates are all quoted as discount yields. Answer: False Page: 138-143 Level: Medium 6. Euro commercial paper is a short term obligation of the European Central Bank. Answer: False Page: 150-151 Level: Easy 7. The U.S. Treasury recently switched from a discriminating price auction to a single price auction because the latter lowered the average price paid by investors. Answer: False Page: Appendix 5A Level: Easy 8. In the T-Bill secondary market the ask yield will normally be less than the bid yield. Answer: True Page: 132 Level: Medium 9. The largest secondary money market in the U.S. is the secondary market for T-Bills. Answer: True Page: 129 Level: Easy 10. Fed funds are generally short term unsecured loans while repos are short term secured loans. Answer: True Page: 133-137 Level: Medium Multiple Choice Questions 11. For the purposes for which they are used, money market securities should have which of the following characteristics? I. Low trading costs II. Little price risk III. High rate of return IV. Life greater than one year A) I and III B) II and IV C) III and IV D) I and II E) I, II and III Answer: D Page: 123-125 Level: Easy 12. Money market securities exhibit which of the following? 58
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
I. Large denomination II. Maturity greater than one year III. Low default risk IV. Contractually determined cash flows A) I, II and III B) I, III and IV C) II, III and IV D) II and IV E) I, II, III and IV Answer: B Page: 123 Level: Medium 13. A repo is in essence a collateralized A) Banker's acceptance B) Certificate of deposit C) Fed funds loan D) Commercial paper loan E) Eurodollar deposit Answer: C Page: 135 Level: Medium 14. A short term unsecured promissory note issued by a company is A) Commercial paper B) T-Bills C) Repurchase agreement D) Negotiable CD E) Banker's acceptance Answer: A Page: 138 Level: Easy 15. A time draft payable to a seller of goods, with payment guaranteed by a bank is a A) Commercial paper security B) T-Bill C) Repurchase agreement D) Negotiable CD E) Banker's acceptance Answer: E Page: 143 Level: Easy 16. In the T-Bill auction process the competitive bidder is guaranteed a _____ and a noncompetitive bidder is guaranteed a _____. A)
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 8

Ch05 - Chapter 5 Money Markets True/False Questions 1....

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online