Test 2- Chapter 6: Money Markets Flashcards

1
Q

The money market is the market for ____-term securities.

A

short term

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2
Q

Short term is deemed __ year of less.

A

1

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3
Q

The money market is the _____ of short-term funds for issuers/borrowers

A

source

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4
Q
What is this describing?
US government issued
1,3,6, and 1 year maturities
Default free
Active secondary market
A

treasury bills

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5
Q

Treasury bills are the _____ risky asset in the world

A

least

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6
Q

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

A

bankers acceptances

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7
Q

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.

A

commercial paper

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8
Q

is there an active secondary market for commercial paper

A

no

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9
Q

Why are commercial papers used?

A

big companies want to borrow short-term

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10
Q

Commercial paper are unsecured what does that mean?

A

not backed by collateral

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11
Q

what does a promissory note mean, in regards to commercial paper?

A

based on the entity saying I promise to pay you back, making it more risky

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12
Q

What happens to commercial papers during a recession?

A

they dry up

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13
Q

Who buys most commercial paper?

A

financial companies

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14
Q

In a commercial paper, the company is basically taking out a loan with you, therefore they are paying you?

A

interest as well

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15
Q

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

A

Middleman

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16
Q

If big company’s know a firm that will buy their commercial paper they don’t have to utilize a?

A

middleman

17
Q

What money market instrument does this describe?

Bank issued time deposit, usually 1 million plus, and tradable

A

negotiable CDS

18
Q

What money market instrument does this describe?

a simultaneous agreement to buy and sell securities

A

repurchase agreement or repos

19
Q

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

A

Federal Funds

20
Q

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

A

London Interbank Offered Rate (LIBOR)

21
Q

LIBOR is the primary global short- term _____benchmark for borrowing rates.

A

benchmark

22
Q

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.

A

18

23
Q

LIBOR is widely used in the ______ market place

A

derivatives