16 Questions
Which of the following statements about money market securities is incorrect?
They are not liquid and cannot be sold in the secondary market.
Which of the following statements about T-bills (Treasury bills) is true?
They are backed by the federal government and are virtually free of credit risk.
If an investor purchases a $10,000 T-bill at a discount of $9,800, what is the investor's gain at maturity?
$200
Which of the following statements about the issuance of T-bills is correct?
They are issued with maturities of 4 weeks, 13 weeks, and 26 weeks on a weekly basis.
Which of the following is NOT a characteristic of money market securities mentioned in the text?
They are traded on the stock exchange.
Based on the information provided, which of the following statements is true?
Money market securities are issued by the Treasury, corporations, and financial intermediaries.
What is the minimum par value for T-bills now?
$1,000
Why do depository institutions retain a portion of their funds in assets that can be easily liquidated?
To cover unanticipated expenses
What backs Treasury bills, making them virtually free of credit risk?
Federal government
Why do individuals with substantial savings invest indirectly through money market funds?
To have easy access to liquid assets
In what circumstance do corporations invest in T-bills?
To cover unanticipated expenses
What is the primary reason why commercial paper typically offers a higher yield than T-bills with the same maturity?
Commercial paper is subject to credit risk and has less liquidity
If an investor purchases a $100,000 commercial paper at a discount of $99,000, and holds it until maturity, what is the investor's approximate yield?
1%
Which of the following statements about negotiable certificates of deposit (NCDs) is correct?
NCDs offer a premium above T-bill yields to compensate for less liquidity and safety
What is the primary purpose of a repurchase agreement (repo) in the money market?
To provide short-term funding for the party selling securities
Which of the following statements about the pricing of Treasury bills (T-bills) is correct?
T-bills are priced at a discount from their par value
Learn about money market securities, which are debt securities with a maturity of one year or less. Find out how they are issued, purchased, and traded in both primary and secondary markets. Understand their role in short-term financing.
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