Quiz on Money Markets

Everything else equal, an effective annual rate will be greater than the bond equivalent yield on the same security.

• TRUE

• FALSE

Money markets exist to help reduce the opportunity cost of holding cash balances.

• TRUE

• FALSE

The majority of money market securities are low-denomination, low-risk investments designed to appeal to individual investors with excess cash.

• TRUE

• FALSE

Commercial paper is a short-term obligation of the U.S. government issued to cover government budget deficits and to refinance maturing government debt.

• TRUE

• FALSE

Commercial paper, Treasury bills, and banker's acceptance rates are all quoted as discount yields.

• TRUE

• FALSE

Euro commercial paper is a short-term obligation of the European Central Bank.

• TRUE

• FALSE

The U.S. Treasury switched from a discriminating price auction to a single price auction because the latter lowered the average price paid by investors.

• TRUE

• FALSE

In the T-bill secondary market the ask yield will normally be less than the bid yield.

• TRUE

• FALSE

The largest secondary money market in the United States is the secondary market for T-bills.

• TRUE

• FALSE

Fed funds are short-term unsecured loans while repos are short-term secured loans.

• TRUE

• FALSE