3. KHANH HOA _ CHUONG 6

Securities with maturities of one year or less are classified as

A) capital market instruments.

B) money market instruments.

C) preferred stock.

D) none of the above

• A

• B

• C

• D

Which of the following is not a money market security?

A) Treasury bill

B) negotiable certificate of deposit

C) common stock

D) federal funds

• A

• B

• C

• D

______are sold at an auction at a discount from par value.

A) Treasury bills

B) Repurchase agreements

C) Banker’s acceptances

D) Commercial

• A

• B

• C

• D

Jarrod King, a private investor, purchases a Treasury bill with a $10,000 par value for $9,645. One hundred days later, Jarrod sells the T-bill for $9,719. What is Jarrod’s expected annualized yield from this transaction?

A) 13.43 percent

B) 2.78 percent

C) 10.55 percent

D) 2.80 percent

E) none of the above

• A

• B

• C

• D

• E

If an investor buys a T-bill with a 90-day maturity and $50,000 par value for $48,500 and holds it to maturity, what is the annualized yield?

• about 13.4 percent

• about 12.5 percent

• about 11.3 percent

• about 11.6 percent

• about 10.7 percent

An investor buys a T-bill with 180 days to maturity and $250,000 par value for $242,000. He plans to sell it after 60 days, and forecasts a selling price of $247,000 at that time. What is the annualized yield based on this expectation?

• about 10.1 percent

• about 12.6percent

• about 11.4 percent

• about 13.5 percent

• about 14.3 percent

Assume investors require a 5 percent annualized return on a six-month T-bill with a par value of $10,000. The price investors would be willing to pay is $ _____

• 10,000

• 9,524

• 9,756

• none of the above

A newly issued T-bill with a $10,000 par value sells for $9,750, and has a 90-day maturity. What is the discount?

• 10.26 percent

• 0.26 percent

• $2,500

• 10.00 percent

• 11.00 percent

Large corporations ____ bids for T-bills so they can typically make amounts. purchase larger

• competitive

• noncompetitive

• very small

• none of the above

At any given time, the yield on _____the yield on a T-bill with the same commercial paper is maturity.

A) slightly less than

B) slightly higher than

C) equal to

D) A and B both occur with about equal frequency

• A

• B

• C

• D