Chapter 6- 1Q Types And Characteristic Of Cash And Cash Equivalants Flashcards
Money Market
Market for short term loan able funds
Buyer is the lender, seller is the borrower
Maturity less than a year
Usually offered as discount to par
Treasury securities are the most actively traded, usually lowest yield
Negotiable CDs
Only money market instrument that pays out interest
Must have a face of 100,000 at least to be a negotiable CD
Loaning to the bank
FDIC Insurance up to 250,000
No prepayment penalty for banks
Commercial paper
Short term unsecured debt used to fund working capital
Exempt from registration as long as under 9 months and for working capital not a fixed asset
London Interbank Offered Rate
Survey of banks conducted each day
Ask for rates on overnight to 1 year (15 different periods)
Average and publish for each currency
MOST WIDELY USED BENCHMARK FOR SHORT TERM INTEREST RATES
Insured Deposits by the FDIC (up to 250,000)
1.Demand Deposits (checking account, savings account, money market accounts)
Safe but low returns
2.Non-Negotiable CDs between you and a bank
Face of as little as $500 and 3 month to 5 year maturities
No interest rate risk