Chapter 3 - Cash, Money Markets and Fx

Question 1

What is the PSA for basic, higher and additional tax payers?

Answer 1

Basic = £1,000
Higher = £500
Additional = £0

Question 2

What instruments do money markets use compared to capital markets?

Answer 2

Money markets = deposits/T bills
Capital markets = bonds/equities

Question 3

What is the time frame for money market instruments compared to capital markets?

Answer 3

Money markets - One year
Capital markets - Long term

Question 4

Rank these instruments from lowest risk to highest risk - CD’s, Bankers acceptance, cash, Commercial paper, T bills

Answer 4

Cash
T Bills
Bankers acceptance
CD’s
Commercial paper

Question 5

If someone is looking to maximise the return of the cash element of their portfolio, which money market instrument would best achieve this?

Answer 5

Commercial paper

Question 6

What is the name of the system which was introduced to minimise the risks of FX transactions?

Answer 6

PVP (payment vs payment)