Cash and Cash Equivalents
Negotiable (jumbo) CDs are issued at ____________ and do not have a ____________
-Face Value -Prepayment Penalty
Which of the following are characteristics of negotiable certificates of deposit? Minimum face value of $100,000. Maturities rarely extend beyond 360 days. May be sold on the secondary market.
1, 2, & 3
Commercial paper (CP) is traded...
At a discount in the money market
All the following securities are bought at a discount EXCEPT A) Treasury bills B) CDs C) zero coupon bonds D) commercial paper
B) CDs
Which of the following would you NOT expect to see issued at a discount? A) Zero-coupon bond B) Treasury Bill C) Bank jumbo CD D) Commercial paper
C) Bank jumbo CD *Of these securities, only the bank jumbo (negotiable) CDs are always interest bearing and issued at par or face value.
All of the following are true of negotiable, jumbo certificates of deposit EXCEPT: A) they are readily marketable. B) they usually have maturities of 1 year or less. C) they are secured obligations of the issuing bank. D) they are usually issued in denominations of $100,000 to $1 million.
C) they are secured obligations of the issuing bank. *Negotiable CDs are general obligations of the issuing bank; they are not secured by any specific asset. They do qualify for FDIC insurance (up to $250,000), but that is not the same as stating that the bank has pledged specific assets as collateral for the loan.
DDA stands for:
Demand Deposit Account, usually a checking account at a bank
When doing cash flow analysis on a mortgage-backed pass-through security, you want to know:
The Average maturities
The LIBOR is:
The world's most widly used benchmark for short-term interest rates
A money market mutual fund would be least likely to invest in which of the following assets? A) Newly issued U.S. Treasury bills B) Newly issued U.S. Treasury notes C) Jumbo CDs D) Repurchase agreements
B) Newly issued U.S. Treasury notes *A money market mutual fund typically invests in money market instruments; those with a maturity date not exceeding 397 days. Treasury notes are issued with maturity dates of 2-10 years.
The value of which of the following would be least likely to be impacted by changes in interest rates? A) A laddered bond portfolio B) A U.S. Treasury bond issued 25 years ago with a 30-year maturity C) A convertible preferred stock D) A bank CD maturing in 5 years
D) A bank CD maturing in 5 years *Bank CDs are non-negotiable (we're not referring to the negotiable jumbo CDs with a maturity of 1 year or less) and, as a result, will not fluctuate in price, regardless of changes to interest rates. In this case, interest rate risk is eliminated
