Davidson; Management - 3rd Australasian Edition



1.
Which of the following is not a characteristic of money market instruments?
A.
short-term to maturity
B.
small denomination
C.
low default risk
D.
high marketability


2.
Small investors are likely to invest in the money market         through
            .
A.
directly; commercial paper
B.
locally; their credit union
C.
indirectly; negotiable CDs
D.
indirectly; money market mutual funds


3.
Which of the following statements about the money market is true?
A.
The money market is a dealer market linked by efficient communications systems.
B.
Money market transactions are seldom over $1 million.
C.
Market transactions include more "primary market" trades for a security than secondary market trades.
D.
Most money market transactions are conducted by mail.


4.
Which statement is not true about Treasury notes?
A.
They have maturities less than one year.
B.
Most are sold by "book-entry" method)
C.
They are sold at a discount.
D.
They are tax free.


5.
The cash market is the market for
A.
Treasury deposits.
B.
borrowing cash
C.
overnight loans settled in immediately available
funds
D.
cash held in exchange settlement accounts at the Reserve Bank of Australia


6.
Treasury Notes are sold to investors
A.
in multiples of $10,000
B.
at par value
C.
on a discount basis
D.
both b and c


7.
Which of the following statements is not true about repurchase agreements?
A.
These are a form of secured borrowing by a bank.
B.
They are most commonly made for less than 1 day (intraday repos), for 1 day or for very short terms.
C.
They are settled using banks
D.
Treasury notes are often used in this type of transaction.


8.
The money market is an important financial market because
A.
the money market is the world's liquidity market.
B.
it is the market in which the Australian Reserve Bank conducts monetary policy.
C.
the government finances most of its credit needs in the money market.
D.
all of the above


9.
Which of the following money market securities is usually not found on a commercial bank's balance sheet?
A.
Ba rated corporate bonds
B.
Treasury notes
C.
certificates of deposit
D.
banker's acceptance


10.
The money market security represented by the largest dollar amount outstanding is
A.
commercial paper.
B.
government agency issues.
C.
negotiable CDs.
D.
Treasury notes.


11.
Which of the following bank money market securities is backed by specified collateral?
A.
negotiable CDs
B.
banker's acceptances
C.
repurchase agreements
D.
commercial paper


12.
Money market securities have very little
A.
default risk.
B.
price risk.
C.
marketability risk.
D.
all of the above.


13.
When firms issuing commercial paper use a backup line of credit, it:
A.
increases the credit risk for investors
B.
decreases the credit risk for investors
C.
has no impact on investors
D.
decreases the marketability of commercial paper


14.
A reverse repurchase agreement calls for
A.
a firm to first sell securities with the agreement to buy them back in a short period at a higher price.
B.
a firm to first buy securities with the agreement to sell them back in a short period at a higher price.
C.
a firm to first sell securities with the agreement to buy them back in a short period at a lower price.
D.
a firm to first buy securities with the agreement to sell them back in a short period at a lower price.


15.
A repurchase agreement calls for
A.
a firm to first sell securities with the agreement to buy them back in a short period at a higher price.
B.
a firm to first buy securities with the agreement to sell them back in a short period at a higher price.
C.
a firm to first sell securities with the agreement to buy them back in a short period at a lower price.
D.
a firm to first buy securities with the agreement to sell them back in a short period at a lower price.


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