TEST BANK
CAPITAL MARKETS: INSTITUTIONS AND INSTRUMENTS
FABOZZI/MODIGLIANI
Chapter 20
MONEY MARKETS
MULTIPLE CHOICE
1. The money market is the market for:
[E]
2. The assets traded in the money market include:
[E]
3. For entities that borrow funds using securities as collateral, the most common financial
instrument is:
[M]
4. Depository institutions have obligations that include:
5. Market participants perceive Treasury securities to carry no default risk because:
[E]
6. Treasury bills have a:
[M]
7. Commercial paper is:
[M]
8. Commercial paper provides short-term funds for:
[M]
9. The maturity of commercial paper is typically less than 270 days because:
10. The risk that the issuer will be unable to sell new paper at maturity is called:
[M]
11. Investors in commercial paper include:
[E]
12. Which of the following statements is most correct?
[M]
13. Eurocommerical paper:
[M]
14. Certificates of deposits:
15. The yields on CDs are a function of:
[M]
16. In a bankers’ acceptance:
[M]
17. Bankers’ acceptances are sold on a discounted basis just like:
[M]
18. The sale of a security with a commitment by the seller to buy the security back from the
purchaser at a specified price and a designated future date is referred to as:
[M]
19. There is no single repo rate; rather rates vary from transaction to transaction depending
on:
20. The federal funds rate:
TRUE/FALSE
1. Treasury bills are quoted on a bank discount basis, not on a price basis.
[E]
2. Commercial paper is rated by nationally recognized statistical rating agencies.
[M]
3. Large-denomination CDs are typically issued in denominations of $1 million or more.
[E]
4. Banks that create bankers’ acceptances are called accepting banks.
[E]
5. Both parties to a repo transaction are exposed to credit risk.
ESSAY QUESTIONS
1. What is a bankers’ acceptance and how is it created?
Key Issues:
2. Compare and contrast Treasury bills, commercial paper, and certificates of deposits.
Key Issues:
3. Why does risk occur in a repo transaction?
Key Issues: