Econ 2035 Ch2.3

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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


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