Exam 10: Factors Affecting the Volume of CDs

Commercial paper, with over $1 trillion outstanding is the largest privately issued portion of the U.S. money market.

Describe the structure of interest rates in the money market. Which instrument anchors the market and appears to be the foundation for other interest rates? Can you explain why this is so? Could the "anchor" of today's money market change in the future? Why?

The rate on commercial paper is typically lower than the prime rate.

Money market investors are especially sensitive to risk.

The money market is a telephone market in which trades of loans and securities are usually negotiated by phone and usually confirmed by wire.

While much lower in market and default risk than possessed by capital-market securities, money market securities are generally higher in currency risk than capital-market securities, according to your text.

Developing countries' money markets are usually dominated by banks.

Investors in the money market seek ____ and ____

The Asian financial crisis, which developed in late 1997, suggested that bank-dominated money markets could yield more easily to political pressure than securities-dominated ones.

With a federal funds transaction, the seller of securities has funds available from the buyer the same day the trade is carried out.

The security which is a deposit "denominated in dollars but held in banks abroad" is a:

The risk that changes in government laws or regulations will reduce an investor's rate of return is known as:

All securities possess some degree of default risk.

According to the textbook, the Chinese money market is:

The money market generally provides loans to borrowers at higher interest rates than in the capital market.

What are four different ways security dealers generate income (and possibly make a profit) and what are the risks of each?

Which of the following markets is a direct competitor to the prime-rate bank loan market?

Actual maturity of a security is always less than that security's original maturity.

When idle cash is not invested, even for a day, in the money market the holder of excess cash balances incurs a(n):

Clearinghouse funds are transferred from bank to bank through the Federal Reserve's wire transfer network in order to make payments in the money market.