Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

Economics > Money Market > Flashcards

Money Market Flashcards

1
Q

What is the primary purpose of the money market?

A

To provide short-term borrowing and lending for businesses and governments.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

True or False: Money market instruments are generally low-risk investments.

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Fill in the blank: The money market typically involves securities with maturities of _____ or less.

A

one year

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is a Treasury bill?

A

A short-term government security with a maturity of one year or less.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Which of the following is NOT a money market instrument? A) Commercial Paper B) Corporate Bonds C) Treasury Bills

A

B) Corporate Bonds

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the role of a money market fund?

A

To invest in short-term, low-risk securities and provide liquidity to investors.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

True or False: Certificates of deposit (CDs) are issued by banks and are considered money market instruments.

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What does the term ‘liquidity’ refer to in the money market?

A

The ease with which an asset can be converted into cash.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Fill in the blank: The _____ rate is the interest rate at which banks lend to one another in the money market.

A

interbank

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is commercial paper?

A

An unsecured, short-term debt instrument issued by corporations.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is the typical maturity range for commercial paper?

A

From a few days to up to 270 days.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

True or False: The money market is a part of the capital market.

A

False

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is a repurchase agreement (repo)?

A

A short-term borrowing mechanism where one party sells securities to another with an agreement to repurchase them at a later date.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Fill in the blank: The _____ is the rate of interest charged on repurchase agreements.

A

repo rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What are the advantages of investing in money market funds?

A

Higher liquidity, low risk, and relatively stable returns.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is the difference between a money market and a capital market?

A

Money markets deal with short-term securities, while capital markets deal with long-term securities.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

True or False: Money market securities are typically issued in large denominations.

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is the primary risk associated with money market investments?

A

Credit risk, though it is generally low.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Fill in the blank: The _____ is the government agency that issues Treasury bills.

A

U.S. Department of the Treasury

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is the main function of the Federal Reserve in relation to the money market?

A

To regulate the money supply and interest rates.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

True or False: Money market instruments are not traded on a secondary market.

A

False

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

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

A

Treasury bills are sold at a price lower than their face value.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Fill in the blank: The _____ is the yield on a money market investment expressed as an annual percentage.

A

annualized yield

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What is the primary regulatory body overseeing the money market?

A

The Securities and Exchange Commission (SEC).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
True or False: The money market is only accessible to institutional investors.
False
26
What is the purpose of the London Interbank Offered Rate (LIBOR)?
To serve as a benchmark interest rate for short-term loans between banks.
27
Fill in the blank: The _____ market is where short-term financial instruments are bought and sold.
money
28
What is the main characteristic of a money market instrument?
Short maturity and high liquidity.
29
True or False: All money market instruments are backed by the government.
False
30
What type of investor typically uses money market accounts?
Conservative investors looking for liquidity and safety.
31
Fill in the blank: Money market accounts typically offer _____ interest rates compared to savings accounts.
higher
32
What is a key feature of money market securities?
They are usually low-risk and provide quick access to cash.
33
What is the primary reason companies issue commercial paper?
To meet short-term financial obligations.
34
True or False: Money market securities can be used as collateral for loans.
True
35
What does it mean when a money market fund is 'no-load'?
It does not charge a sales fee when you buy or sell shares.
36
Fill in the blank: The _____ is often considered a safe haven during market volatility.
money market
37
What is the primary difference between a money market fund and a savings account?
Money market funds typically invest in short-term securities, while savings accounts are bank deposits.
38
True or False: The interest earned on money market accounts is typically taxable.
True
39
What is the typical investment horizon for money market instruments?
Short-term, usually less than one year.
40
Fill in the blank: The _____ is the minimum investment amount for many money market funds.
initial deposit
41
What type of risks are associated with money market funds?
Interest rate risk and credit risk, though they are generally low.
42
What is the main benefit of using Treasury bills for investors?
They are backed by the full faith and credit of the U.S. government.
43
True or False: Money market investments are suitable for long-term growth.
False
44
What is the typical yield on a money market fund compared to other investments?
It is typically lower than stocks but higher than traditional savings accounts.
45
Fill in the blank: The _____ is a financial institution that provides short-term loans to banks.
central bank
46
What is the primary use of a money market account?
To earn interest while maintaining liquidity.
47
True or False: Money market funds are required to maintain a stable net asset value (NAV).
True
48
What is the minimum maturity for a money market instrument?
One day
49
Fill in the blank: The _____ is a standard measure of the performance of money market funds.
7-day yield
50
What is the primary risk of investing in commercial paper?
The risk of default by the issuing corporation.
51
True or False: Money market securities can be purchased directly from the issuer.
True
52
What is the purpose of using a sweep account?
To automatically transfer excess funds into a higher-yielding investment like a money market fund.
53
Fill in the blank: Money market investments are generally considered a _____ investment strategy.
conservative
54
What is the impact of rising interest rates on money market funds?
They tend to increase the yields of money market funds.
55
True or False: Money market funds are not insured by the FDIC.
True
56
What type of institutions are major players in the money market?
Banks, corporations, and institutional investors.
57
Fill in the blank: The _____ is often used as a benchmark for money market rates.
federal funds rate
58
What is the primary goal of money market investors?
To preserve capital while earning a return.
59
True or False: Money market instruments are typically issued in small denominations.
False
60
What is a key advantage of Treasury bills over other money market instruments?
They are considered risk-free due to government backing.
61
Fill in the blank: The _____ is the amount of interest earned on a money market investment over a year.
annual percentage yield (APY)
62
What is the primary function of the money market in the economy?
To facilitate the flow of short-term funds.
63
True or False: Money market funds can be a good option for emergency savings.
True
64
What type of financial instrument is a 'certificate of deposit'?
A time deposit with a fixed interest rate and maturity date.
65
Fill in the blank: The _____ is the interest rate used by banks to lend to each other overnight.
federal funds rate
66
What is the primary risk associated with investing in a money market fund?
The potential for loss if the fund's investments underperform.
67
True or False: Money market funds are required to maintain a stable net asset value of $1 per share.
True
68
What is a key feature of a 'no-load' money market fund?
It does not charge any fees for transactions.
69
Fill in the blank: The _____ is used to indicate the performance of a money market fund over time.
yield
70
What is the typical liquidity of money market instruments?
High liquidity, allowing quick access to cash.
71
True or False: All money market funds invest in the same types of securities.
False
72
What is the primary benefit of using a money market fund for cash management?
Higher returns compared to traditional checking or savings accounts.
73
Fill in the blank: Money market instruments are often referred to as _____ investments.
cash equivalent
74
What is the role of the Securities and Exchange Commission (SEC) in the money market?
To regulate and oversee the activities of money market funds.
75
True or False: Money market accounts typically have a minimum balance requirement.
True
76
What is a key characteristic of a money market fund's investment strategy?
Investing in short-term, high-quality securities.
77
Fill in the blank: The _____ is the rate at which banks lend to customers, influenced by the money market.
prime rate
78
What is a 'government money market fund'?
A fund that invests primarily in government securities.
79
True or False: Money market funds can have exposure to foreign currency.
True
80
What is the primary function of a 'sweep account'?
To automatically transfer excess funds into a higher-yielding investment.
81
Fill in the blank: A _____ is a short-term loan secured by collateral.
repo

Economics (5 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions