TEST BANK
CAPITAL MARKETS: INSTITUTIONS AND INSTRUMENTS
FABOZZI/MODIGLIANI
Chapter 21
TREASURY AND AGENCY SECURITIES MARKETS
MULTIPLE CHOICE
1. The benchmark interest rate used throughout the U.S. economy is the interest rate on:
[E]
2. The prominent role of U.S. Treasury securities is due to:
[M]
3. The fundamental difference between discount and coupon Treasury securities is:
[M]
4. Treasury securities with an original maturity greater than ten years are called:
5. Treasury securities that adjust for inflation are referred to as:
[E]
6. Which of the following statements is false?
[M]
7. The highest yield accepted by the Treasury is referred to as the:
[M]
8. Primary dealers for government securities include:
[E]
9. In which of the following markets are Treasury securities issued when they are traded
prior to the issuance of the Treasury?
10. Coupon stripping is the process of:
[M]
11. The price of a Treasury security is forced to trade near its theoretical value based on spot
rates through the process of:
[M]
12. The financial instruments traded in the Federal agency securities market include:
[M]
13. Government-sponsored enterprises:
[M]
14. Governments-sponsored enterprises, which issue agency securities include:
15. GSE securities are not backed by the full faith and credit of the U.S. government. Thus,
investors purchasing GSEs are exposed to:
[M]
16. Convertible bonds issued by the British government are referred to as:
[M]
17. Which of the following foreign governments issue inflation-indexed securities?
[M]
18. Central governments issue their securities through:
[M]
19. The Treasury does not issue:
20. The secondary market for Treasury securities is a(n):
[E]
TRUE/FALSE
1. Interest income from Treasury securities is tax-exempt from Federal taxation.
[M]
2. All federally-related institutions are exempt from SEC registration.
[M]
3. Any firm can deal in government securities.
[E]
4. Noncompetitive tenders may be submitted for up to a $1 million face amount.
[M]
5. Salomon Brothers violated the auction process.
[E]
ESSAY QUESTIONS
1. Describe the auction method used by the Treasury to market Treasury securities.
Key Issues:
2. Describe the role of government dealers and government brokers in the Treasury
securities market.
Key Issues:
3. How did the Treasury respond to the violation of the auction process by Salomon
Brothers?
Key Issues: