Question 1

Bill Yates, a private investor, purchases a six-month (182-day) T-bill with a $10,000 par value for $9,700.If Bill holds the Treasury bill to maturity, his annualized yield is ____ percent.

Accepted Answer

The answer of Bill Yates, a private investor, purchases a...

Question 2

The price noncompetitive bidders will pay at a Treasury bill auction is the

Accepted Answer

Noncompetitive bidders in a Treasury bill auction pay the weighted average price of all accepted competitive bids.

Question 3

A ____ is not a money market security.

Accepted Answer

Bonds are not considered money market securities because they have longer maturities and are typically issued in the capital market. The other options listed are all considered money market securities.

Question 4

Freeman Corp., a large corporation, plans to issue 45-day commercial paper with a par value of $3,000,000.Freeman expects to sell the commercial paper for $2,947,000.Freeman's annualized cost of borrowing is estimated to be ____ percent.

Accepted Answer

The answer of Freeman Corp., a large corporation, plans to...

Question 5

During periods of uncertainty about the economy, there is a shift from risky money market securities to Treasury securities.

Accepted Answer

During times of economic uncertainty, investors tend to seek safer investments, and Treasury securities are considered a low-risk option. This often results in a shift from riskier money market securities to Treasury securities.

Question 6

Exporters can hold a banker's acceptance until the date at which payment is to be made, yet they frequently sell the acceptance before then at a discount to obtain cash immediately.

Accepted Answer

This statement is true. Exporters can choose to sell their banker's acceptance before the payment date to receive immediate cash, often at a discounted rate.

Question 7

Most repo transactions use government securities.

Accepted Answer

Repo transactions typically involve the buying and selling of government securities, such as Treasury bills, notes, and bonds.

Question 8

When a firm sells its commercial paper at a ____ price than projected, their cost of raising funds will be ____ than what they initially anticipated.

Accepted Answer

The answer of When a firm sells its commercial paper...

Question 9

Money market security values are less sensitive to interest rate movements than bonds.

Accepted Answer

Money market securities are short-term debt securities issued by governments, financial institutions, and corporations with a maturity of one year or less. They are considered to be less risky than bonds because they have a shorter maturity and are less sensitive to interest rate movements. Bonds, on the other hand, have longer maturities and are therefore more sensitive to changes in interest rates.

Question 10

Which of the following securities is most likely to be used in a repo transaction?

Accepted Answer

Treasury bills are highly liquid and have low credit risk, making them the most common security used in repo transactions. Commercial paper and certificates of deposit may also be used, but they have higher credit risk and may not be as readily accepted as collateral. Common stock is generally not used in repo transactions due to its volatility and illiquidity.

Question 11

You purchase a six-month (182-day) T-bill with a $10,000 par value for $9,700.The Treasury bill discount is ____ percent.

Accepted Answer

The answer of You purchase a six-month (182-day) T-bill with...

Quiz 6: Money Markets