2.3 Financial Markets Instruments

U.S. Treasury bills are considered the safest of all money market instruments because there is no risk of ________. A) defeat B) default C) desertion D) demarcation

default

Which of the following are not traded in a capital market? A) U.S. government agency securities. B) State and local government bonds. C) Repurchase agreements. D) Corporate bonds.

Repurchase agreements.

Which of the following instruments is not traded in a money market? A) Residential mortgages. B) U.S. Treasury Bills. C) Negotiable bank certificates of deposit. D) Commercial paper.

Residential mortgages.

A debt instrument sold by a bank to its depositors that pays annual interest of a given amount and at maturity pays back the original purchase price is called A) commercial paper. B) a negotiable certificate of deposit. C) a municipal bond. D) federal funds.

a negotiable certificate of deposit.

A short-term debt instrument issued by well-known corporations is called A) commercial paper. B) corporate bonds. C) municipal bonds. D) commercial mortgages.

commercial paper.

Which of the following is a long-term financial instrument? A) A negotiable certificate of deposit. B) A repurchase agreement. C) A U.S. Treasury bond. D) A U.S. Treasury bill.

A U.S. Treasury bond.

Which of the following are short-term financial instruments? A) A repurchase agreement. B) A share of Walt Disney Corporation stock. C) A Treasury note with a maturity of four years. D) A residential mortgage.

A repurchase agreement.

Which of the following instruments are traded in a money market? A) Bank commercial loans. B) Commercial paper. C) State and local government bonds. D) Residential mortgages.

Commercial paper.

Which of the following instruments are traded in a capital market? A) Corporate bonds. B) U.S. Treasury bills. C) Negotiable bank CDs. D) Repurchase agreements.

Corporate bonds.

The British Bankers Association average of interbank rates for dollar deposits in the London market is called the A) Libor rate. B) federal funds rate. C) prime rate. D) Treasury Bill rate.

Libor rate.

________ are short-term loans in which Treasury bills serve as collateral. A) Repurchase agreements B) Negotiable certificates of deposit C) Federal funds D) U.S. government agency securities

Repurchase agreements

Which of the following instruments are traded in a capital market? A) U.S. Government agency securities. B) Negotiable bank CDs. C) Repurchase agreements. D) U.S. Treasury bills.

U.S. Government agency securities.

Which of the following instruments are traded in a money market? A) State and local government bonds. B) U.S. Treasury bills. C) Corporate bonds. D) U.S. government agency securities.

U.S. Treasury bills.

Collateral is ________ the lender receives if the borrower does not pay back the loan. A) a liability B) an asset C) a present D) an offering

an asset

Equity and debt instruments with maturities greater than one year are called ________ market instruments. A) capital B) money C) federal D) benchmark

capital

U.S. Treasury bills pay no interest but are sold at a ________. That is, you will pay a lower purchase price than the amount you receive at maturity. A) premium B) collateral C) default D) discount

collateral

Federal funds are A) funds raised by the federal government in the bond market. B) loans made by the Federal Reserve System to banks. C) loans made by banks to the Federal Reserve System. D) loans made by banks to each other.

loans made by banks to each other.

Bonds issued by state and local governments are called ________ bonds. A) corporate B) Treasury C) municipal D) commercial

municipal

Prices of money market instruments undergo the least price fluctuations because of A) the short terms to maturity for the securities. B) the heavy regulations in the industry. C) the price ceiling imposed by government regulators. D) the lack of competition in the market.

the short terms to maturity for the securities.