Exam 10: Factors Affecting the Volume of CDs

The two principal objectives of money market investors are safety and liquidity.

The Federal Reserve System tries to keep its discount rate reasonably close to the discount rate quoted by the Bank of Japan, according to the textbook.

Once a money market security is issued it grows shorter in actual maturity each day.

Using the definition or description are listed below, identify each of the key terms and concepts discussed in this chapter . a. Money transferred by writing a check and presenting it for collection. b. Funds available for immediate payment. c. Time span between issue date and redemption date for a financial asset. d. Time span between today's date and the date of retirement for a financial asset. e. Probability of changes in government laws and regulations lowering the expected rate of return on a financial asset.

If a money market investor has a temporary cash surplus but fails to invest that surplus for a day, the income lost can be made up by investing the funds at interest the following day.

Bankers acceptances will tend to have a ____ return and ____ default risk than will Treasury bills.

Using the definition or description are listed below, identify each of the key terms and concepts discussed in this chapter . a. Probability of loss in the expected return for a financial asset due to adverse movements in currency prices. b. Probability of loss in expected return due to rising or falling interest rates. c. Probability of lowering the expected return on a financial asset due to the necessity of investing the asset's earnings stream in lower yielding financial assets. d. Probability that a rising average price level will reduce the purchasing power of the income expected from a financial asset. e. Institution created by society to channel temporary cash surpluses in order to meet temporary cash deficits.

U.S. Government securities traded in the money market are assumed by investors to carry zero reinvestment risk.

Most trades in the money market are arranged via:

Money market CDs have minimum denominations of $100,000.

The risk that a U.S. investor who purchases Italian bonds will lose money in trying to convert bond interest payments made in euros into U.S. dollars is called:

The new regulatory rules that surfaced in the wake of the 07-09 credit crisis is an example of political risk.

One reason T-bills offer lower yields is that the interest earned on them is free from federal taxation.

Bankers acceptances are backed only by the credit worthiness of the bank which guarantees the acceptance.

Key price and yield determinants in the money market include:

The risk averseness of the money market can be seen when the commercial paper market dries up.

European money market instruments denominated in Euros will likely increase some forms of currency risk.

Money market investors are especially sensitive to risk.

By 1998, the volume of Treasury bills outstanding was about:

A money market lender of funds benefits when money market rates fall because reinvestment risk is then lower.