Question 1

A money market participant with a surplus cash position is likely to withdraw from that market until a cash deficit arises, according to your text.

Accepted Answer

A) True 
 B)False

Question 2

Which security listed below best fits this definition: "Time drafts issued by large multi-national banks?"

Accepted Answer

A)  Federal Agency securities 
B)  Treasury bills 
C)  Federal funds 
D)  Negotiable certificates of deposit 
E)  Eurodollar deposits
F) Bankers acceptances
G) Commercial paper
H) U.S. Government bonds
I) None of the above 
A)  Federal Agency securities 
B)  Treasury bills 
C)  Federal funds 
D)  Negotiable certificates of deposit 
E)  Eurodollar deposits
F) Bankers acceptances
G) Commercial paper
H) U.S. Government bonds
I) None of the above

Question 3

Political risk refers to the possibility that changes in government laws or regulations will result in a diminished rate of return to the investor.

Accepted Answer

A) True 
 B)False

Question 4

The U.S. Treasury is the largest of all money market borrowers worldwide.

Accepted Answer

A) True 
 B)False

Question 5

Which one of the following does not, in general, cause the volume of CDs to fluctuate?

Accepted Answer

A)  Credit market conditions 
B)  Corporate earnings 
C)  Alternative interest rates 
D)  Level of federal debt 
A)  Credit market conditions 
B)  Corporate earnings 
C)  Alternative interest rates 
D)  Level of federal debt

Question 6

Money market securities are considered to be lower in political risk than longer-term financial instruments, according to your text.

Accepted Answer

A) True 
 B)False

Question 7

Currency risk has generally been reduced in recent years due to more stable exchange rates, according to your text.

Accepted Answer

A) True 
 B)False

Question 8

A government bond has an original maturity of 20 years, but with the passage of time now has actual maturity of 12 months; this security is now a money market instrument.

Accepted Answer

A) True 
 B)False

Question 9

The Canadian money market, according to the textbook is:

Accepted Answer

A)  Securities dominated 
B)  Bank dominated 
C)  Larger than the Eurocurrency market 
D)  Deposit dominated 
E)  None of the above 
A)  Securities dominated 
B)  Bank dominated 
C)  Larger than the Eurocurrency market 
D)  Deposit dominated 
E)  None of the above

Question 10

Many of the largest participants in the money market operate on both the demand side and supply side of that market.

Accepted Answer

A) True 
 B)False

Question 11

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?

Accepted Answer

A)  $20,000 
B)  $50,000 
C)  $100,000 
D)  $120,000 
E)  $150,000
F) $180,000
G) $200,000
H) None of the above 
A)  $20,000 
B)  $50,000 
C)  $100,000 
D)  $120,000 
E)  $150,000
F) $180,000
G) $200,000
H) None of the above

Question 12

Money market instruments typically carry less default risk than capital-market securities but more market risk.

Accepted Answer

A) True 
 B)False

Question 13

Federal funds are loans made to banks by the Federal Reserve.

Accepted Answer

A) True 
 B)False

Question 14

Federal funds, due to their nature, could be labeled "same-day money."

Accepted Answer

A) True 
 B)False

Question 15

The market that provides funds mainly to finance long-term investment projects is the:

Accepted Answer

A)  Money market 
B)  Capital market 
C)  Federal funds market 
D)  Commercial paper market 
E)  None of the above 
A)  Money market 
B)  Capital market 
C)  Federal funds market 
D)  Commercial paper market 
E)  None of the above

Question 16

A market is "broad and deep" if it can absorb a large volume of transactions with no more than a small impact on security prices and interest rates.

Accepted Answer

A) True 
 B)False

Question 17

The largest borrower(s) in the money market is (are):

Accepted Answer

A)  Foreign governments 
B)  U.S. Treasury 
C)  U.S. corporations 
D)  Households 
E)  State and local governments 
A)  Foreign governments 
B)  U.S. Treasury 
C)  U.S. corporations 
D)  Households 
E)  State and local governments

Exam 10: Factors Affecting the Volume of CDs

A money market participant with a surplus cash position is likely to withdraw from that market until a cash deficit arises, according to your text.

Which security listed below best fits this definition: "Time drafts issued by large multi-national banks?"

Political risk refers to the possibility that changes in government laws or regulations will result in a diminished rate of return to the investor.

The U.S. Treasury is the largest of all money market borrowers worldwide.

Which one of the following does not, in general, cause the volume of CDs to fluctuate?

Money market securities are considered to be lower in political risk than longer-term financial instruments, according to your text.

Currency risk has generally been reduced in recent years due to more stable exchange rates, according to your text.

A government bond has an original maturity of 20 years, but with the passage of time now has actual maturity of 12 months; this security is now a money market instrument.

The Canadian money market, according to the textbook is:

Many of the largest participants in the money market operate on both the demand side and supply side of that market.

Money market instruments typically carry less default risk than capital-market securities but more market risk.

Federal funds are loans made to banks by the Federal Reserve.

Federal funds, due to their nature, could be labeled "same-day money."

The market that provides funds mainly to finance long-term investment projects is the:

A market is "broad and deep" if it can absorb a large volume of transactions with no more than a small impact on security prices and interest rates.

The largest borrower(s) in the money market is (are):

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