FI 412 Exam 2 Questions and Answers Latest Update

FI 412 Exam 2 Questions and Answers Latest Update Wholesale Markets - Answers where most transactions are large, which thus precludes significant individual participation Money Markets - Answers made up of short-term, low-risk, and highly liquid securities T-bills - Answers primary function in the money markets is to "make a market" for these securities Competitive Bid - Answers the technique for initially selling treasury bills Federal Funds Rate - Answers indirectly controlled by the fed in implementing companies' monetary policies Term Security - Answers funds can be accessed by the investor only after the maturity date Banker's Acceptance - Answers an order to pay a specified sum to the bearer at a future date London Interbank Offer Rate (LIBOR) - Answers the amount paid on Eurodollar deposits Commercial Paper - Answers maturity is always less than 270 days to avoid bid rate registration with the SEC Direct Placement - Answers issuers bypass the dealer and sell directly to the end investor Discounting - Answers investor pays less for a security than it will be worth when it matures Liquid Market - Answers environment where securities can be bought and sold quickly with low transaction costs Key Characteristics of Money Markets - Answers sold in large denominations, low default risk, and maturities of less than one year Eurodollars - Answers dollar deposits in bank accounts in England Liquidity Intervention - Answers when an intermediary provides the role of creating liquidity where it did not previously exist STRIPS - Answers treasury securities that pay no coupon interest Primary Market - Answers the market in which initial public offerings occur IPO - Answers the first public issuance of securities by a corporation Treasury Bills - Answers treasury securities with maturities less than one year Treasury Notes - Answers treasury securities that have maturities of 1-10 years Treasury Bonds - Answers treasury securities with maturities greater than 10 years Agency Bonds - Answers bonds that are not issued by the Treasury but are issued to raise funds in the national interest Municipal Bonds - Answers bonds that are typically free from federal income tax Treasury Inflation-Indexed Bonds - Answers bonds whose principal amount changes based on the consumer price index Credit Default Swaps (CDS) - Answers insurance against default in principal and interest payments of a credit instrument Restrictive Convenants - Answers constraints on a company's management designed to protect bondholders Preferred Stock - Answers shares that receive a fixed dividend but do not have the right to vote ECNs - Answers computerized trading systems that match buy and sell orders on price and quantity P/E Ratio - Answers the price of a stock dividend by its earnings per share ADR - Answers a receipt for shares of a foreign company that a U.S. bank purchased and placed in its vault