WEEK 6 - BANKER'S ACCEPTANCE

Question 1

is a negotiable piece of paper that functions like a post-dated check. A bank, rather than an account holder, guarantees the payment.

Answer 1

banker’s acceptance

Question 2

is a short-term debt obligation backed by the U.S. Treasury Department with a maturity of one year or less.

Answer 2

Treasury bills

Question 3

bills are issued when the government needs money for a short period. These bills
are issued only by the central government, and the interest on them is determined by market
forces.

Answer 3

Treasury bills

Question 4

Advanatages of Government Treasury Bills

Answer 4

1. Risk free
2. Liquidity
3. Non-competitive bidding

Question 5

Limitations of Government Treasury Bills

Answer 5

1. Lower returns
2. Taxation

Question 6

are securities that pay a fixed rate of interest every six months until the security matures, which is when Treasury pays the par
value.

Answer 6

Treasury notes and bonds

Question 7

medium-term obligations with maturity of 2,3,5, or 10 years

Answer 7

Treasury notes

Question 8

are long-term obligations with much longer original-issue maturities. For instance 30 years

Answer 8

Treasury bonds

Question 9

Advantages of Bonds

Answer 9

1. Receive income through interest payments
2. Hold the bonds to maturity and get all your principal back
3. Profit when you sell the bond at a higher price

Question 10

Disadvanatages of Bonds

Answer 10

1. Bonds pay out lower returns than stocks
2. Companies can default on your bonds
3. Bonds yield can fall

Question 11

is a form of short-term borrowing for dealers in government
securities. In the case of a repo, a dealer sells government securities to investors, usually on an overnight basis, and buys them back the following day at a slightly higher price

Answer 11

Repurchase agreement

Question 12

is a short-term secured loan: one party sells securities to
another and agrees to repurchase those securities later at a higher price. The securitie serve as collateral.

Answer 12

repurchase agreement

Question 13

Types of RRP’s

Answer 13

1. Due bill
2. Tri-Party repo
3. Whole Loan repo
   4 Equity repo
4. Buy/Sell repo
5. Securities Lending

Question 14

an internal account is used to keep the collateral for the borrower

Answer 14

Due bill

Question 15

With this transaction, another party acts as the intermediary between the borrower and the lender. The lender will give the third party the collateral, and the third party will then give the borrower some type of substitution collateral

Answer 15

Tri-Party repo

Question 16

With this transaction, the borrower use a loan or some other debt obligation as the collateral instead of a financial security.

Answer 16

Whole loan repo

Question 17

use equities intead of bonds. The underlying security of the transation will be stock in a comapny

Answer 17

Equity repo

Question 18

a formal repurchase agreement is not actually put into place. Instead, they will buy a security and sell it on a forward repurchase at the same time.

Answer 18

Buy/Sell repo

Question 19

This is typically done when a seller/borrower wants to go short on a partcular type of security.

Answer 19

Securities lending