FIN 326 CHAPTER 5 EXAM QUESTIONS
WITH CORRECT ANSWERS
The rate of return on a repo is - Answer- Strongly affected by the current Fed funds rate
at the time of repo
Determined at the time of repo
Which one of the following statement about commercial paper is NOT true? - Answer-
Carries an interest rate above the prime rate
A negotiable CD - Answer- Is a bank issued time deposit
A bankers acceptance is - Answer- A liability of the importer and the importers bank
The most liquid of the money market securities are - Answer- T-Bills
In dollars outstanding in 2010 the largest money market security was - Answer- T-Bills
LIBOR is generally _____ the Fed funds rate because foreign bank deposits are
generally ______ than domestic bank deposits - Answer- Greater than
More risky
For the purposes for which they are used, money market securities should have which
of the following characteristics? - Answer- Low trading costs
Little price risk
Money market securities exhibit which of the following? - Answer- Large denomination
Low default risk
Contractual determined CF
A repo is in essence a collateralized - Answer- Fed funds loan
A short term unsecured promissory note issued by a company is - Answer- Commercial
paper
A time draft payable to a seller of goods, with payment guaranteed by a bank is a -
Answer- Bankers acceptance
In the T-Bill auction process, the competitive bidder is guaranteed a _______ and a
noncompetitive bidder is guaranteed a ________ - Answer- Maximum price
WITH CORRECT ANSWERS
The rate of return on a repo is - Answer- Strongly affected by the current Fed funds rate
at the time of repo
Determined at the time of repo
Which one of the following statement about commercial paper is NOT true? - Answer-
Carries an interest rate above the prime rate
A negotiable CD - Answer- Is a bank issued time deposit
A bankers acceptance is - Answer- A liability of the importer and the importers bank
The most liquid of the money market securities are - Answer- T-Bills
In dollars outstanding in 2010 the largest money market security was - Answer- T-Bills
LIBOR is generally _____ the Fed funds rate because foreign bank deposits are
generally ______ than domestic bank deposits - Answer- Greater than
More risky
For the purposes for which they are used, money market securities should have which
of the following characteristics? - Answer- Low trading costs
Little price risk
Money market securities exhibit which of the following? - Answer- Large denomination
Low default risk
Contractual determined CF
A repo is in essence a collateralized - Answer- Fed funds loan
A short term unsecured promissory note issued by a company is - Answer- Commercial
paper
A time draft payable to a seller of goods, with payment guaranteed by a bank is a -
Answer- Bankers acceptance
In the T-Bill auction process, the competitive bidder is guaranteed a _______ and a
noncompetitive bidder is guaranteed a ________ - Answer- Maximum price
