U.S. Treasury securities have almost zero default and some market risk, but are subject, like all other securities, to inflation risk.
A) True
B) False
A) True
The liquidity of money market assets allows an investor to quickly cash in on an asset, but doing so carries a high risk of losing principal.
A) True
B) False
B) False
With a federal funds transaction, the seller of securities has funds available from the buyer three days after the trade is carried out.
A) True
B) False
B) False
Government securities dealers never take a position of risk; instead, they bring buyers and sellers of securities together.
A) True
B) False
B) False
Commercial paper is a government-issued, short-term note traded in the money markets.
A) True
B) False
B) False
Suppose a money market investor, a large, nonfinancial corporation, has a $10 million cash surplus expected to last for 36 days. The corporation has been approached by a government security dealer in need of funds about a collateralized $10 million loan that can be repaid at any time on 24 hours' notice, at a 10 percent annual yield. How much interest income can the corporation expect if it goes ahead and makes the loan to the dealer for 36 days?
H) none of the above
Deposit balances held at Federal Reserve banks and at larger correspondent banks across the nation are examples of:
D) federal funds.
Direct obligations of a government used as a major source of short-term funds are typically called:
D) Treasury bills.
A government securities dealer that deals directly with the Federal Reserve Bank of New York is called:
A) a primary dealer.
The risk that an investor will be forced to place earnings from a loan or a security into a lower-yielding investment because interest rates have subsequently fallen is known as:
