FIN 3403 CH 11 EXAM 2024_2025
QUESTIONS AND CORRECT
DETAILED ANSWERS (VERIFIED
ANSWERS) GRADED A+++
Which of the following is traded in the money market?
A.
Highly liquid securities
B.
Paper notes
C.
Coins
D.
Long term securities - correct answers A.
Highly liquid securities
The term money market is actually a misnomer. Money-currency-is not traded
in the money markets. Because the securities that do trade there are short-term
and highly liquid; however, they are close to being money.
Money market securities have ▼ high
low, default risk.
They mature in ▼
one year or less one year or more from their original issue date.
Flexibility and innovation ▼
are
,are not, the characteristics of the money market. - correct answers low default
risk
one year or less
are
Flexibility and innovation are two important characteristics of any financial
market, and the money market is no exception. Despite the wholesale nature of
the money market, innovative securities and trading methods have been
developed to give small investors access to money market securities.
Which of the following statements explains the situation in late the 1970s and
early 1980s?
A.
There was no commercial bank interest-rate ceiling.
B.
There was rapid expansion of the banking industry.
C.
Inflation pushed short-term interest rates above the level that banks could
legally pay.
D.
Investors pulled their money out of money markets and put it into banks. -
correct answers C.
Inflation pushed short-term interest rates above the level that banks could
legally pay.
Why do investors temporarily warehouse funds in the money market? (Check
all that apply.)
A.
It enables them to earn exceptionally high returns.
B.
,It is the only investment option available for interim investment.
C.
It provides higher return than the money in banks.
D.
It reduces the opportunity cost of holding idle funds. - correct answers C.
It provides higher return than the money in banks.
D.
It reduces the opportunity cost of holding idle funds.
Suppose Peninsula Corporation does not prefer to hold idle cash balances. It
holds $200m surplus cash in December 2016 that it plans to use for paying
bonuses to its employees in April 2017.
In this case, it would make an ▼ investment in a 5-year bond
investment in stocks
interim investment in the money market. - correct answers interim investment
in the money market.
Which of the following is a difficulty faced when money market players are
discussed by listing those who borrow and those who lend?
A.
This type of distinction is not at all useful.
B.
Most participants operate on both sides of the market.
C.
The participants who borrow tend to hide it.
D.
The data on lenders is not easily available. - correct answers B.
Most participants operate on both sides of the market.
, The U.S. Treasury Department is always a ▼
supplier
demander
of money market funds.
It is the largest of all money market ▼
suppliers
borrowers worldwide.
The Fed will
▼
purchase
sell
Treasury securities if it believes interest rates should be lowered. - correct
answers demander
borrowers
purchase
Why do investors temporarily warehouse funds in the money market? (Check
all that apply.)
A.
It enables them to earn exceptionally high returns.
B.
It reduces the opportunity cost of holding idle funds.
C.
It is the only investment option available for interim investment.
D.
QUESTIONS AND CORRECT
DETAILED ANSWERS (VERIFIED
ANSWERS) GRADED A+++
Which of the following is traded in the money market?
A.
Highly liquid securities
B.
Paper notes
C.
Coins
D.
Long term securities - correct answers A.
Highly liquid securities
The term money market is actually a misnomer. Money-currency-is not traded
in the money markets. Because the securities that do trade there are short-term
and highly liquid; however, they are close to being money.
Money market securities have ▼ high
low, default risk.
They mature in ▼
one year or less one year or more from their original issue date.
Flexibility and innovation ▼
are
,are not, the characteristics of the money market. - correct answers low default
risk
one year or less
are
Flexibility and innovation are two important characteristics of any financial
market, and the money market is no exception. Despite the wholesale nature of
the money market, innovative securities and trading methods have been
developed to give small investors access to money market securities.
Which of the following statements explains the situation in late the 1970s and
early 1980s?
A.
There was no commercial bank interest-rate ceiling.
B.
There was rapid expansion of the banking industry.
C.
Inflation pushed short-term interest rates above the level that banks could
legally pay.
D.
Investors pulled their money out of money markets and put it into banks. -
correct answers C.
Inflation pushed short-term interest rates above the level that banks could
legally pay.
Why do investors temporarily warehouse funds in the money market? (Check
all that apply.)
A.
It enables them to earn exceptionally high returns.
B.
,It is the only investment option available for interim investment.
C.
It provides higher return than the money in banks.
D.
It reduces the opportunity cost of holding idle funds. - correct answers C.
It provides higher return than the money in banks.
D.
It reduces the opportunity cost of holding idle funds.
Suppose Peninsula Corporation does not prefer to hold idle cash balances. It
holds $200m surplus cash in December 2016 that it plans to use for paying
bonuses to its employees in April 2017.
In this case, it would make an ▼ investment in a 5-year bond
investment in stocks
interim investment in the money market. - correct answers interim investment
in the money market.
Which of the following is a difficulty faced when money market players are
discussed by listing those who borrow and those who lend?
A.
This type of distinction is not at all useful.
B.
Most participants operate on both sides of the market.
C.
The participants who borrow tend to hide it.
D.
The data on lenders is not easily available. - correct answers B.
Most participants operate on both sides of the market.
, The U.S. Treasury Department is always a ▼
supplier
demander
of money market funds.
It is the largest of all money market ▼
suppliers
borrowers worldwide.
The Fed will
▼
purchase
sell
Treasury securities if it believes interest rates should be lowered. - correct
answers demander
borrowers
purchase
Why do investors temporarily warehouse funds in the money market? (Check
all that apply.)
A.
It enables them to earn exceptionally high returns.
B.
It reduces the opportunity cost of holding idle funds.
C.
It is the only investment option available for interim investment.
D.
