Money Market Review

Money market securities are long-term debt instruments.

• True

• False

Money market transactions provide an avenue for both acquiring money (borrowing) and investing (lending) excess funds for short periods

• True

• False

Which of the following statements is true?

• Money market transactions provide an avenue for both acquiring money (borrowing) and investing (lending) excess funds for short periods

• Money market transactions provide an avenue for acquiring money (borrowing)only, NOT investing (lending) excess funds for short periods

• Money market transactions provide an avenue for investing (lending) excess funds for short periods only, NOT for acquiring money (borrowing)

When issuers of commercial paper sell their issues directly to the public using their own sales force, the commercial paper is said to be -

• Directly placed

• Dealer placed

When issuers of commercial paper sell their issues directly to the public using their own sales force, the commercial paper is said to be "directly placed"

• True

• False

When issuers sell CP to large commercial paper dealers who then resell the issue to the public, the instrument is said to be "dealer placed"

• True

• False

Bankers' acceptances are used to facilitate foreign trade.

• True

• False

Bankers' acceptances are actively traded and are considered quite safe since they are secured both by the issuing bank and by the goods originally purchased by the importer.

• True

• False

In a repurchase agreement (repo), a dealer sells securities to another dealer and agrees to repurchase them at a specific time, at a specified price.

• True

• False

Repos and reverse repos are typically long-term

• True

• False

Bills of Exchange are unconditional orders to pay a stated sum of money on a specified date.

• True

• False

Bills of Exchange are __________ orders to pay a stated sum of money on a specified date.

Bills of Exchange are accepted by banks.

• True

• False

Banks do not accept bills of exchange.

• True

• False

Bank bill is another term for bankers acceptance.

• True

• False

The ideal period for a Bill of Exchange is the same as the period for which the goods are in transit.

• True

• False

A Bill of Exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand at a fixed or determinable future time, a sum certain in money to or to the order of a specified person or to the bearer.

• True

• False

Bills of Exchange were first mentioned in statute of 1379.

• True

• False

Bills of Exchange are used between trading parties to make the process of payment for goods more efficient.

• True

• False

Can trading parties use bills of exchange to process payment for goods?

• Yes

• No

Clearly, the Bill of Exchange must contain financial conditions.

• True

• False

A Bill of Exchange would enable the ___________  of goods to receive payment immediately and allow the ____________ of the goods to defer payment until the goods are actually delivered.

• Seller --- buyer

• Buyer --- seller

Bills of Exchange are used by buyers and sellers of goods to finance importation of goods.

• True

• False

If a Bill of Exchange is drawn on a bank, it is called a  ________ draft.

If a Bill of Exchange is drawn on another party, it is called a trade draft.

• True

• False

A Letter of Credit is an arrangement between banks and customers to pay and accept bills that are drawn up on the conditions specified in the Letter of Credit.

• True

• False

A Letter of _________   is an arrangement between banks and customers to pay and accept bills that are drawn up on the conditions specified in the Letter of Credit.

A Letter of Credit will specify which of the following conditions: (select all that apply)

• The amount of the bill

• The tenor of the bill

• To whom the bill is to be made payable

A Bill of Exchange is generally a bearer instrument.

• True

• False

Investing in a call deposit will ensure that the deposited amount from the borrower can be reclaimed within the agreed notice period.

• True

• False

How many day/s is the shortest period for a call deposit?

A fixed deposit is a deposit placed for a fixed period at a fixed rate of interest.

• True

• False

A _______ deposit is a deposit placed  for a fixed period at a fixed rate of interest.

• Fixed

• Call

What is the interest rate to pay for GBP 1-M for 1 year at 6%? (write it in whole no)

Fill in the blank: When currency is GBP, the formula for computation of interest rate is : Principal x Rate x (no of days /  ______ )

Can Central Banks directly lend to commercial banks?

• Yes

• No

O/N is the term for a transaction where the first value date is today and the maturity date is the next business day.

• True

• False

When a country is performing well and market participants feel that this performance will at least be sustained in the future, the demand for funds will tend to ___________ .

An example of market participant rate is the deposit rate for borrowing and lending.

• True

• False

The primary purpose of Central banks in lending to commercial banks is to ensure the banks have enough liquidity to meet demand.

• True

• False

In a special repo, 'special' refers to the:

• Conterparty

• Maturity

• Collateral

• Documentation

Today is June 6. The repo dealer at DEF Bank has been asked to do some funding for the bank. The dealer needs to raise about USD 50 million and has been asked to see what rates can be achieved. As DEF Bank is only looking for liquid money, the dealer is looking at the rates for one-day and open repos. The rates quoted on the screen are: USD 3.10 - 3.15 If the dealer at DEF wants to raise money, which rate will be used? Input your answer correct to two decimal places.  

When the dealer looks at the bank's available collateral, he discovers that the bank does not have USD 50 million of US securities on its books to use as collateral.  Instead it has the following: USD 30 million US Treasuries 4.5% 11 November 20x6 trading at 100.50 (clean price) EUR 10 million German Bunds 5% 30 April 20X3 trading at 99.89 (clean price) EUR 15 million French OATs 4.75% 31 May 20X6 trading at 99.45 (clean price) What sort of repo structure will enable the bank to use the euro collateral to raise USD? 

• Classic repo

• Buy/sell back repo

• Cross currency repo

What do you think is the most common maturity for repurchase agreements? 

• A day

• A week

• A month

• Three months

• Six months

• A year

If a security goes on special, the repo rate applied to this particular security will be   higher lower 

• Lower

• Higher

Cross currency repos offer investors an opportunity of a yield gain. 

• True

• False

The origins of Bills of Exchange can be tracked back to at least the 4th century BC.

• True

• False

Bill of Exchange is one of the oldest credit instruments in the world.

• True

• False