Econ 2035 Ch2.3
U.S. Treasury bills are considered the safest of all money market instruments because there is almost no risk of
default
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
discount
Which of the following instruments is not traded in a money market?
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 negotiable certificate of deposit
A short-term debt instrument issued by well-known corporations is called
commercial paper
The British Banker's Association average of interbank rates for dollar deposits in the London market is called the
libor rate
Which of the following is a long-term financial instrument?
A U.S. Treasury bond
Which of the following are short-term financial instruments?
A repurchase agreement
Which of the following instruments are traded in a money market?
Commercial paper
Which of the following instruments are traded in a capital market?
Corporate bonds
Which of the following are not traded in a capital market?
Repurchase agreements
________ are short-term loans in which Treasury bills serve as collateral
Repurchase agreements
Which of the following instruments are traded in a capital market?
U.S. Government agency securities
Which of the following instruments are traded in a money market?
U.S. Treasury bills
The most liquid securities traded in the capital market are
U.S. Treasury bonds
Collateral is ________ the lender receives if the borrower does not pay back the loan
an asset
Equity and debt instruments with maturities greater than one year are called ________ market instruments.
capital
federal funds are
loans made by banks to each other
Bonds issued by state and local governments are called ________ bonds
municipal
Prices of money market instruments undergo the least price fluctuations because of
the short terms to maturity for the securities
