Test 2- Chapter 6: Money Markets Flashcards
The money market is the market for ____-term securities.
short term
Short term is deemed __ year of less.
1
The money market is the _____ of short-term funds for issuers/borrowers
source
What is this describing? US government issued 1,3,6, and 1 year maturities Default free Active secondary market
treasury bills
Treasury bills are the _____ risky asset in the world
least
What is this describing?
time draft payable to a seller of goods insured by a bank;30-270 days maturity, active secondary market, mostly used for international trade
bankers acceptances
An unsecured promissory note issued by large credit worthy corporations; usually $1 million or more, these are rated, and limited to 270 days maturity by government unless publically issued.
commercial paper
is there an active secondary market for commercial paper
no
Why are commercial papers used?
big companies want to borrow short-term
Commercial paper are unsecured what does that mean?
not backed by collateral
what does a promissory note mean, in regards to commercial paper?
based on the entity saying I promise to pay you back, making it more risky
What happens to commercial papers during a recession?
they dry up
Who buys most commercial paper?
financial companies
In a commercial paper, the company is basically taking out a loan with you, therefore they are paying you?
interest as well
If a commercial paper goes beyond 270 days it has to be made more official, by going through a _________. Or if your a midsize company and don’t know anyone who would want to buy it you would go to a _______. Both answers are the same
Middleman
If big company’s know a firm that will buy their commercial paper they don’t have to utilize a?
middleman
What money market instrument does this describe?
Bank issued time deposit, usually 1 million plus, and tradable
negotiable CDS
What money market instrument does this describe?
a simultaneous agreement to buy and sell securities
repurchase agreement or repos
What money market instrument does this describe?
unsecured lending between banks and is mostly done overnight. this becomes a source and use of funds for banks
Federal Funds
What term does this describe?
average rate charged by borrowing among group of global banks. was administered in London until scandal, but is now administered by NYSE
London Interbank Offered Rate (LIBOR)
LIBOR is the primary global short- term _____benchmark for borrowing rates.
benchmark
To figure out the LIBOR rate is each day, group of ____ banks figures out what the average rate was for each day, and then the NYSE collects the information.
18
LIBOR is widely used in the ______ market place
derivatives
