Interview Prep

Question 1

What are Agency Securities?

Answer 1

Debt instruments issued by government-sponsored enterprises (GSEs) or federal agencies.

Question 2

True or False: Treasury Bills are long-term investments.

Answer 2

False

Question 3

What is the maturity range for Treasury Bills?

Answer 3

They typically have maturities of 4, 8, 13, 26, or 52 weeks.

Question 4

Fill in the blank: Repurchase agreements are also known as _____ agreements.

Answer 4

repos

Question 5

What is the primary purpose of Treasury Bills?

Answer 5

To finance the national debt and manage liquidity.

Question 6

Multiple Choice: Which of the following is NOT a characteristic of Agency Securities? A) Backed by the government B) Higher yields than Treasury securities C) Low credit risk D) Long-term maturity

Answer 6

D) Long-term maturity

Question 7

What does the term ‘repo rate’ refer to?

Answer 7

The interest rate charged on repurchase agreements.

Question 8

True or False: Agency Securities are considered to have a higher risk than Treasury Bills.

Answer 8

True

Question 9

What are the two parties involved in a Repurchase Agreement?

Answer 9

The seller (borrower) and the buyer (lender).

Question 10

What is the typical duration of a repurchase agreement?

Answer 10

They can range from overnight to several weeks, but most are overnight.

Question 11

Fill in the blank: The interest earned on Treasury Bills is _____ when they are issued at a discount.

Answer 11

realized at maturity

Question 12

Multiple Choice: Which agency issues Agency Securities? A) Federal Reserve B) U.S. Treasury C) Fannie Mae D) SEC

Answer 12

C) Fannie Mae

Question 13

What is the significance of the secondary market for Treasury Bills?

Answer 13

It provides liquidity and allows investors to buy and sell T-Bills before maturity.

Question 14

True or False: Repurchase agreements can be used to manage short-term funding needs.

Answer 14

True

Question 15

What is a key risk associated with Agency Securities?

Answer 15

Credit risk, as they are not fully backed by the U.S. government.

Question 16

What does ‘discount’ mean in the context of Treasury Bills?

Answer 16

The difference between the purchase price and the face value at maturity.

Question 17

Fill in the blank: The typical investor in Treasury Bills is _____ investors seeking safety.

Answer 17

institutional

Question 18

Multiple Choice: Which of the following is a feature of Repurchase Agreements? A) Fixed interest rates B) Collateralized loans C) Long-term duration D) Non-negotiable

Answer 18

B) Collateralized loans

Question 19

What is the role of the Federal Reserve in the money markets?

Answer 19

To implement monetary policy and influence liquidity.

Question 20

True or False: Treasury Bills do not pay periodic interest payments.

Answer 20

True

Question 21

What is the main advantage of investing in Treasury Bills?

Answer 21

They are considered one of the safest investments due to government backing.

Question 22

Fill in the blank: The face value of Treasury Bills is typically _____ dollars.

Answer 22

1,000

Question 23

What is the process for bidding on Treasury Bills during an auction?

Answer 23

Investors can submit competitive or non-competitive bids.

Question 24

Multiple Choice: Agency Securities generally offer _____ compared to U.S. Treasury securities. A) Higher liquidity B) Higher yields C) Lower credit risk D) Longer maturities

Answer 24

B) Higher yields

Question 25

What is a ‘reverse repo’?

Answer 25

A transaction where the buyer of securities agrees to sell them back at a later date.