Lecture 6 (chapter 11)

Question 1

Money market?

Answer 1

A market where highly liquid securities are traded
(a security that can be converted to cash without losing any value). Is used for short-term financial needs

Question 2

Securities traded on these markets has:

Answer 2

1. Grossistmarknader
2. Low default risk
3. Short maturity

Question 3

The goal with money markets?

Answer 3

Demand side: An interim investment (mellaninvestering) where investors/buyers dont has the goal to get the highest return of their funds, but still earn more than just having the funds on the bank AND have easy access to funds.

Supply side: Cash inflows and outflows are often not synchronized. Governments can borrow short term funds and then pay it back as they receive the tax revenue.

Question 4

The primary money market players:

Answer 4

US Treasury (Finansdepartementet)
The federal reserve system
Commercial banks (affärsföretag)
Investments- and securitiebanks
Indviduals

Question 5

US treasury?

Answer 5

Demand of funds

Question 6

T-bills?

Answer 6

Treasury bills (Statsskuldsväxlar). Given out by the government and is assumed to be risk-free since government can always pay back. Given out as discount which makes price lower than face value. (värde vid förfall)

Question 7

Deep market?

Answer 7

Many buyers / sellers

Question 8

Liquid market?

Answer 8

Issues easily bought / sold with low transaction costs

Question 9

Federal funds?

Answer 9

Short term funds borrowed/loaned between financial institutions