Question 1

The relatively long-term CD which consists of a package or series of 6-month CDs is known as the:

Accepted Answer

The answer of The relatively long-term CD which consists of...

Question 2

The system now in use in the United States for calculating the deposit reserve requirements of commercial banks is known as:

Accepted Answer

The system now in use in the United States for calculating the deposit reserve requirements of commercial banks is known as lagged reserve accounting. This system calculates reserve requirements based on deposits from an earlier period, allowing banks to know their reserve requirements ahead of time.

Question 3

Checking accounts and NOWs are examples of:

Accepted Answer

Checking accounts and Negotiable Order of Withdrawal (NOW) accounts are primarily used for transactions, making them examples of transaction deposits. They allow for frequent deposits and withdrawals, facilitating day-to-day financial transactions.

Question 4

Selected U.S. banks and foreign banks with U.S. branches began in the mid- 1980s to issue an innovative new hybrid financial instrument with some characteristics of term CDs and some similarity to medium-term corporate bonds with maturities reaching out beyond one year to as long as 10 years. These new instruments are known as:

Accepted Answer

Deposit notes are hybrid financial instruments that combine features of term certificates of deposit (CDs) and medium-term corporate bonds, offering maturities ranging from one to ten years. They were introduced by selected U.S. and foreign banks with U.S. branches in the mid-1980s.

Question 5

The nation whose interbank loan market nearly collapsed in 1995 due to concerns over the financial condition of its domestic banks and the lack of adequate information on bank condition was:

Accepted Answer

The answer of The nation whose interbank loan market nearly...

Question 6

Chartered Bank CDs and Bearer Deposit Notes are issued by banks from what country?

Accepted Answer

Chartered Bank CDs and Bearer Deposit Notes are financial instruments issued by banks in Canada.

Question 7

Sweep accounts are a relatively new product offered by banks. Some characteristics include:

Accepted Answer

The answer of Sweep accounts are a relatively new product...

Question 8

Partly as a result of sweep accounts, U.S. bank legal reserve balances have fallen by more than half. One of the consequences caused by this decline has been:

Accepted Answer

Sweep accounts allow banks to minimize the amount of non-interest-bearing reserves by automatically transferring (sweeping) funds from deposit accounts into interest-bearing accounts. This reduces the amount of reserves banks hold at the Fed, leading to a decrease in the supply of tradable reserves. This reduction in supply can increase the volatility of the Federal funds market, where banks lend reserves to one another overnight to meet reserve requirements.

Question 9

Sweep accounts have caused an increase in the volatility of the Fed funds market due to the lessened supply of tradable reserves. This is of some concern to the Federal Reserve since:

Accepted Answer

The answer of Sweep accounts have caused an increase in...

Question 10

A primary uses of the bankers acceptance

Accepted Answer

A banker's acceptance is primarily used as a financing tool for international trade. It serves as a short-term debt instrument issued by a company that is guaranteed by a commercial bank, making it a safe and efficient way to finance the purchase and shipment of goods across borders. Options B and C describe other banking services that are not directly related to the primary function of a banker's acceptance.

Question 11

The volume of commercial paper outstanding exceeded $2 trillion for the first time in

Accepted Answer

The volume of commercial paper outstanding exceeded $2 trillion for the first time in 2006.

Question 12

Fannie and Freddie, government-sponsored agencies, the

Accepted Answer

The correct answer is D because, for Fannie Mae and Freddie Mac, while they are government-sponsored enterprises, the U.S. federal government does not guarantee the principal or interest of the securities they issue. This means both statements B and C are correct.

Question 13

What do we mean by the term commercial paper?

Accepted Answer

The answer of What do we mean by the term...

Question 14

Why is commercial paper attractive to such money market investors as banks, insurance companies, money market funds and industrial companies?

Accepted Answer

The answer of Why is commercial paper attractive to such...

Question 15

Please describe the functions that dealers perform in the functioning of the commercial paper market. In what market segments are they most active? Least active?

Accepted Answer

The answer of Please describe the functions that dealers perform...

Question 16

Why do some investors (savers) find commercial paper unsatisfactory for their investment needs?

Accepted Answer

The answer of Why do some investors (savers) find commercial...

Question 17

Exactly how is the rate of return on commercial paper figured?Is the method used to determine paper's rate of return similar to the return calculation for any other money market instrument? Which one?

Accepted Answer

The answer of Exactly how is the rate of return...

Question 18

What are the principal advantages accruing to a company large enough to tap the commercial paper market for funds?

Accepted Answer

The answer of What are the principal advantages accruing to...

Question 19

What are the principal disadvantages of commercial paper to an issuer? To potential buyers?

Accepted Answer

The answer of What are the principal disadvantages of commercial...

Question 20

Who are the principal investors in commercial paper? Why do the types of investor institutions you have named find commercial paper particularly attractive?

Accepted Answer

The answer of Who are the principal investors in commercial...

Quiz 11: Commercial Banks, Major Corporations, and Federal Credit Agencies in the Money Market