Chapter 11

Question 1

asset backed commercial paper

Answer 1

Short-term
commercial paper secured by a bundle of assets,
usually mortgages.

Question 2

bearer instrument

Answer 2

A security payable to the holder or
“bearer” when presented. No proof of ownership
is required.

Question 3

book entry

Answer 3

A system of tracking securities ownership where no certificate is issued. Instead, the
security issuer keeps records, usually electronically, of who holds outstanding securities.

Question 4

competitive bidding

Answer 4

Competing in an auction against
other potential buyers of Treasury securities

Question 5

deep market

Answer 5

Markets in which there are many participants and a great deal of activity, thus ensuring
that securities can be rapidly sold at fair prices.

Question 6

demand deposit

Answer 6

A deposit held by a bank that must
be paid to the depositor on demand. Demand
deposits are more commonly called checking
accounts.

Question 7

direct placements

Answer 7

An issuer’s bypassing the
dealer and selling the security directly to the
investor.

Question 8

discounting

Answer 8

Reduction in the value of a security at
purchase such that when it matures at full value,
the investor receives a fair return.

Question 9

liquid market

Answer 9

A market in which securities can be
bought and sold quickly and with low transaction
costs.

Question 10

london interbank bid rate (LIBID)

Answer 10

: The rate of interest
large international banks charge on overnight
loans among themselves.

Question 11

london interbank off rate (LIBOR)

Answer 11

The interest rate
charged on short-term funds bought or sold
between large international banks.

Question 12

noncompetitive bidding

Answer 12

Offering to buy Treasury
securities without specifying a price; the securities are ultimately sold at the weighted average
of the competitive bids accepted at the same
auction.

Question 13

term security