Essentials of Investments Chapter 2 – Questions & Correct Answers 100% LATEST UPDATE 2026
characteristics of Money markets - (answer)1. cash equivalent instruments
2. short term
3. marketeable
4. liquid
5. low-risk
characteristics of capital markets and examples - (answer)1. longer-term
2. higher risk securities
examples: long term debt markets, equity, derivative markets
Why are money market instruments usually out of access to small investors? - (answer)because they
trade in large denominations
ask price - (answer)price you would pay for a security if you bought from a securities dealer.
If you want to sell 100 shares at 25 dollars per share, this is the ask price
bid price - (answer)a slightly lower price that security dealers would pay to buy a T-bill from you.
If you are willing to pay 23 dollars for a particular share, this is the bid price
Bank discount formula - (answer)(asked price) x (days until maturity/360)= x
1-x= y
y x 10,000
, Essentials of Investments Chapter 2 – Questions & Correct Answers 100% LATEST UPDATE 2026
Types of Money market securities - (answer)1. Tbills
2. CD's
3. Commercial Paper
4. Banker's acceptances
5. Eurodollars
6. Repos and Reverses
7. Brokers' call
8. Federal Funds
9. Libor
Certificate of Deposits - (answer)Time deposit with a bank that cannot be withdrawn upon demand.
The depositor receives interest and principal only at the end of the CD's fixed term.
Highly marketable.
Denominations larger than 100,000 are usually negotiable in that they can be sold to another investor if
the owner has to cash in the CF before the mat.
issured by the FDIC for up to 250,000 in case of bank insolvency
commercial paper - (answer)short term unsecured debt issued by large corporations.
Issued by these companies instead of borrowing from banks.
Issued in denominations of 100,000.
Maturities up to 70 days
characteristics of Money markets - (answer)1. cash equivalent instruments
2. short term
3. marketeable
4. liquid
5. low-risk
characteristics of capital markets and examples - (answer)1. longer-term
2. higher risk securities
examples: long term debt markets, equity, derivative markets
Why are money market instruments usually out of access to small investors? - (answer)because they
trade in large denominations
ask price - (answer)price you would pay for a security if you bought from a securities dealer.
If you want to sell 100 shares at 25 dollars per share, this is the ask price
bid price - (answer)a slightly lower price that security dealers would pay to buy a T-bill from you.
If you are willing to pay 23 dollars for a particular share, this is the bid price
Bank discount formula - (answer)(asked price) x (days until maturity/360)= x
1-x= y
y x 10,000
, Essentials of Investments Chapter 2 – Questions & Correct Answers 100% LATEST UPDATE 2026
Types of Money market securities - (answer)1. Tbills
2. CD's
3. Commercial Paper
4. Banker's acceptances
5. Eurodollars
6. Repos and Reverses
7. Brokers' call
8. Federal Funds
9. Libor
Certificate of Deposits - (answer)Time deposit with a bank that cannot be withdrawn upon demand.
The depositor receives interest and principal only at the end of the CD's fixed term.
Highly marketable.
Denominations larger than 100,000 are usually negotiable in that they can be sold to another investor if
the owner has to cash in the CF before the mat.
issured by the FDIC for up to 250,000 in case of bank insolvency
commercial paper - (answer)short term unsecured debt issued by large corporations.
Issued by these companies instead of borrowing from banks.
Issued in denominations of 100,000.
Maturities up to 70 days
