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CTP > CH05-Money Markets > Flashcards

CH05-Money Markets Flashcards

1
Q

Which Money Market instruments are issued at a discount?

A

CP
ABCP
Gov’t Paper

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2
Q

Which Money Market instruments are interest-bearing?

A

Bank Obligations

Floating Rate Notes (FRNs)

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3
Q

Who issues Commercial Paper?

A

Companies and Financial Institutions

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4
Q

What is standard maturity of CP?

A

overnight to 270 days
average=30 days
most matures in under 45 days

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5
Q

Is CP secured or unsecured?

A

CP=unsecured (Commercial Paper)

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6
Q

Do you get a higher return on a CP or an ABCP?

A

ABCP has a higher return b/c it’s more complex

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7
Q

Is ABCP secured or unsecured?

A

ABCP=secured (Asset Backed Commercial Paper)

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8
Q

What is the maturity of a Bank Obligation?

A

1 day - over 1 year

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9
Q

What is is called when the US Treasury issues gov’t paper for less than 1 year?

A

T-bills

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10
Q

What is is called when the US Treasury issues gov’t paper for more than 1 year?

A

Treasury Notes

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11
Q

Which types of Money Market instruments are secured?

A

ABCP-Asset backed Commercial Paper
REPOS-Repurchase Agreements
sometimes Floating Rate Notes are secured

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12
Q

Define REPOS

A

REPOS=Repurchase Agreement

Owner sells security to investor and agrees to repurchase it at a later date for a slightly higher price

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13
Q

Define Bilateral Repo

A

collateral and funds exchanged directly between the two parties

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14
Q

Define Tr-party Repo

A

collateral is held by and funds are exchanged through a broker-dealer. Considered safest method for REPOS

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15
Q

Define MMFs

A

Money Market Funds are commingled pools of money market securities. Established and managed by FIs

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16
Q

MMF portfolio rules

A

WAM=weighted average maturity

WAL=weighted average life

17
Q

CBES

A

Commerical Book-Entry System = a delivery system that provides simultaneous transfer of securities against settlement of funds. Security owners receive interest and redemption payments wired directly

18
Q

Which Money Market instruments have Variable interest rates (not fixed)?

A

FRNs and REPOS

Floating-rate notes and Repurchase agreements

19
Q

Which money market instrument is only issued by banks?

A

bank obligations

20
Q

Which money market instrument is only issued by municipalities?

A

Gov’t paper

21
Q

maximum maturity for U.S. publicly traded commercial paper (CP)

A

270 days

22
Q

Why do most investors ensure they invest in highly rated individual issues of commercial paper (CP) and set strict counterparty limits?

A

CP cannot be secured against any particular asset.

23
Q

can CP be secured against a particular asset?

A

No, this is a disadvantage

24
Q

T / F

Short duration mutual funds invest in securities with longer maturities than money market funds.

A

True

25
Q

In contrast with money market funds (MMFs), short-duration mutual funds

A

have a higher risk of price volatility.

26
Q

Do Short-duration mutual funds typically have a fixed unit currency value, i.e., a net asset value (NAV)?

A

No, short duration mutual funds do NOT typically have a fixed unit currency value

27
Q

What is usually being sold and repurchased in a repurchase agreement (repo)?

A

Government debt, however, repos can be based on any security.

28
Q

Define Eurodollars (Eurodollar Deposits)

A

Dollar-denominated deposits held in FIs outside the US.
Eurodollars may be issued as negotiable Eurodollar CDs or as Non-negotiable Eurodollar time deposits. Both of these are interest-bearing.

29
Q

Do Gov’t paper, CP, and BAs bear interest?

A

No: GP, CP, BA do not pay interest.

GP, CP, BA are discounted instruments; they are issued below par value and pay par value at maturity

30
Q

The Fed implements US monetary policy through ____ and how?

A

FOMC (Federal Open Market Committee). The FOMC implements monetary policy through the purchase and sale of Treasury securities in the secondary markets.

31
Q

____ is fixed rate and unsecured, issued by governments or municipalities and not by a bank.

A

Government Paper

32
Q

__________ can be unsecured or secured and are issued by financial institutions, and carry a variable rate of return

A

FRNs

33
Q

_____ are issued by financial institutions, secured and carry a negotiable interest rate.

A

REPOs

34
Q

which ST instruments have price risk?

A

CP, ABCP AND GOV’T PAPER

35
Q

which ST instrument doesn’t have liquidity risk?

A

CP

CTP (20 decks)

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