Post Session Quiz - Introduction To Money Market
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The money markets are used for which of the following?
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Long-term borrowing
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Short-term borrowing
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Both long-term and short-term borrowing
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This Post Session Quiz on Introduction to Money Market assesses knowledge on short-term borrowing, money market transactions, and instruments like certificates of deposit and bills of exchange. It is crucial for learners seeking to understand financial markets.
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- 2.
Which of the following transactions are NOT carried out in the money market?
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Buying or selling government bonds
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Buying or selling stocks
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Buying or selling deposits
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Borrowing or lending short-term funds
Correct Answer(s)
A. Buying or selling government bonds
A. Buying or selling stocksExplanation
The correct answer is "Buying or selling government bonds, Buying or selling stocks." These transactions are not carried out in the money market because the money market deals with short-term debt instruments and liquid assets, such as treasury bills, commercial papers, and certificates of deposit. Buying or selling government bonds and stocks are typically done in the capital market, where long-term securities are traded.Rate this question:
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- 3.
Central banks are not permitted to participate in the money market.
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True
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False
Correct Answer
A. FalseExplanation
Central banks are actually permitted to participate in the money market. They often engage in activities such as buying and selling government securities, conducting open market operations, and providing liquidity to commercial banks. These actions help regulate the money supply, manage interest rates, and stabilize the financial system. Therefore, the statement that central banks are not allowed to participate in the money market is false.Rate this question:
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- 4.
Which of the following represents the time-span associated with money market transactions?
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One year or less
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One to 10 years
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10 years or more
Correct Answer
A. One year or lessExplanation
Money market transactions typically involve short-term borrowing and lending of funds, usually for a period of one year or less. This includes instruments such as Treasury bills, commercial paper, and certificates of deposit, which have maturities ranging from a few days to one year. Transactions with a time-span of one to 10 years would fall under the category of capital market transactions, while transactions with a time-span of 10 years or more would typically be associated with long-term investments in the bond or equity markets.Rate this question:
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- 5.
A receipt is issued by a bank to a depositor to acknowledge money deposited. The bank guarantees to repay the principal plus interest at maturity.The receipt could be sold in the Market at a price. The above definition refers to which of the following?
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Call deposit
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Certificate of deposit
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Fixed deposit
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Bankers Acceptance
Correct Answer
A. Certificate of depositExplanation
A certificate of deposit is a financial instrument issued by a bank to a depositor. It serves as a receipt to acknowledge the money deposited, and the bank guarantees to repay the principal amount plus interest at maturity. The certificate of deposit can also be sold in the market at a price. This aligns with the definition given in the question.Rate this question:
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- 6.
Which one of the following instruments is used in trade finance to make the process of payment for goods more efficient?
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Bills of exchange
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Commercial paper
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Repos
Correct Answer
A. Bills of exchangeExplanation
Bills of exchange are commonly used in trade finance to facilitate the payment process for goods. They are a written order issued by a seller to a buyer, requiring the buyer to pay a specified amount of money at a future date. This instrument helps to ensure that the payment is made efficiently by providing a legally binding document that can be easily transferred between parties. By using bills of exchange, the seller can receive payment without the need for immediate cash, while the buyer can defer payment until a later date, making the overall trade process more efficient.Rate this question:
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Current Version
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Oct 21, 2024Quiz Edited by
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Nov 16, 2012Quiz Created by
Anurag_quiz
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