FIN 341 EXAM 2 PRACTICE QUESTIONS WITH
DETAILED EXPLANATIONS 2026
◉ Fed funds are short-term unsecured (uncollateralized) loans
while repos are short-term secured (collateralized) loans.
Answer: True
◉ The most liquid of the money market securities are.
Answer: T-bills
◉ Which of the following descriptions does not apply to money
market securities.
Answer: Long maturity
◉ Which of the following securities is most likely to be used in a
repo transaction?.
Answer: Treasury bill
◉ When a firm sells commercial paper at a ____ price than projected,
its cost of raising funds will be _____ than what it initially anticipated..
Answer: higher; lower AND lower; higher
, ◉ Money marker security values are less sensitive to interest rate
movements than bonds.
Answer: True
◉ U.S. Treasury bills do not offer coupon payments but are sold at a
discount from par value.
Answer: True
◉ The rate at which depository institutions effectively lend or
borrow funds from each other is the.
Answer: federal funds rate
◉ If a firm believes that it will have sufficient cash flows to cover
interest payments, it may consider using _____ debt and ____ equity,
which implies a ____ degree of financial leverage..
Answer: more; less; higher
◉ The bond indenture is a legal document specifying the rights and
obligations of both the issuing firm and the bondholders.
Answer: true
◉ Corporate bonds usually pay interest on a semi-annual basis.
Answer: true
DETAILED EXPLANATIONS 2026
◉ Fed funds are short-term unsecured (uncollateralized) loans
while repos are short-term secured (collateralized) loans.
Answer: True
◉ The most liquid of the money market securities are.
Answer: T-bills
◉ Which of the following descriptions does not apply to money
market securities.
Answer: Long maturity
◉ Which of the following securities is most likely to be used in a
repo transaction?.
Answer: Treasury bill
◉ When a firm sells commercial paper at a ____ price than projected,
its cost of raising funds will be _____ than what it initially anticipated..
Answer: higher; lower AND lower; higher
, ◉ Money marker security values are less sensitive to interest rate
movements than bonds.
Answer: True
◉ U.S. Treasury bills do not offer coupon payments but are sold at a
discount from par value.
Answer: True
◉ The rate at which depository institutions effectively lend or
borrow funds from each other is the.
Answer: federal funds rate
◉ If a firm believes that it will have sufficient cash flows to cover
interest payments, it may consider using _____ debt and ____ equity,
which implies a ____ degree of financial leverage..
Answer: more; less; higher
◉ The bond indenture is a legal document specifying the rights and
obligations of both the issuing firm and the bondholders.
Answer: true
◉ Corporate bonds usually pay interest on a semi-annual basis.
Answer: true
