2.14 Money market securities

Question 1

Money market Securities

Answer 1

Debt securities that mature in one year or sooner

Generally highly liquid

Easily bought and sold

Very safe

Question 2

Commercial paper

Answer 2

Large corporations, banks, and financial firms with high credit ratings may issue commercial paper to cover short term needs such as payroll and inventory

Unsecured

Issued at a discount

Matures usually in 90 days but can go as long as 270 days

Generally issued in lots of $100,000

Question 3

Bankers acceptance

Answer 3

A short term credit instrument issued by a business for the purchase or sale of goods,

Usually in an international market

Usually issued at a discount to face value

Question 4

Treasury bills

Answer 4

Short term debt obligations issued by the US treasury to regulate the money supply

THE MOST SECURE SECURITY IN THE WORLD 🌎

Question 5

Re-purchase agreements or REPO

Answer 5

A repo is a form of short term borrowing

Question 6

Certificates of deposit (CDs)

Answer 6

These allow bank, savings and loan, and Credit union customers to receive higher interest on their deposits than a savings or checking account

Question 7

Money market funds

Answer 7

Mutual funds that invest in highly rated, short term money market debt securities, such as commercial paper, treasury bills, and CDs

Investing directly in money market securities is more common for institutional investors than individuals

Question 8

Which securities are considered types of cash equivalents?

Answer 8

Money market Securities;

US treasury bills

Commercial paper

Bankers acceptances

Certificate of deposits (CDs) (these are not securities though)