Interview Prep Flashcards
What are Agency Securities?
Debt instruments issued by government-sponsored enterprises (GSEs) or federal agencies.
True or False: Treasury Bills are long-term investments.
False
What is the maturity range for Treasury Bills?
They typically have maturities of 4, 8, 13, 26, or 52 weeks.
Fill in the blank: Repurchase agreements are also known as _____ agreements.
repos
What is the primary purpose of Treasury Bills?
To finance the national debt and manage liquidity.
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
D) Long-term maturity
What does the term ‘repo rate’ refer to?
The interest rate charged on repurchase agreements.
True or False: Agency Securities are considered to have a higher risk than Treasury Bills.
True
What are the two parties involved in a Repurchase Agreement?
The seller (borrower) and the buyer (lender).
What is the typical duration of a repurchase agreement?
They can range from overnight to several weeks, but most are overnight.
Fill in the blank: The interest earned on Treasury Bills is _____ when they are issued at a discount.
realized at maturity
Multiple Choice: Which agency issues Agency Securities? A) Federal Reserve B) U.S. Treasury C) Fannie Mae D) SEC
C) Fannie Mae
What is the significance of the secondary market for Treasury Bills?
It provides liquidity and allows investors to buy and sell T-Bills before maturity.
True or False: Repurchase agreements can be used to manage short-term funding needs.
True
What is a key risk associated with Agency Securities?
Credit risk, as they are not fully backed by the U.S. government.
What does ‘discount’ mean in the context of Treasury Bills?
The difference between the purchase price and the face value at maturity.
Fill in the blank: The typical investor in Treasury Bills is _____ investors seeking safety.
institutional
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
B) Collateralized loans
What is the role of the Federal Reserve in the money markets?
To implement monetary policy and influence liquidity.
True or False: Treasury Bills do not pay periodic interest payments.
True
What is the main advantage of investing in Treasury Bills?
They are considered one of the safest investments due to government backing.
Fill in the blank: The face value of Treasury Bills is typically _____ dollars.
1,000
What is the process for bidding on Treasury Bills during an auction?
Investors can submit competitive or non-competitive bids.
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
B) Higher yields
What is a ‘reverse repo’?
A transaction where the buyer of securities agrees to sell them back at a later date.
