BAFI 3273 W4 - Money Market Trading

What is the bid price?

• the price at which the price market is willing to buy

• the price at which the price maker is willing to sell

• the price at which the buyer is willing to buy

• the price at which the buyer is willing to sell

What is not correct about bid-offer prices?

• Bid prices can sometimes be equal to or higher than offer prices in illiquid markets.
• Bid prices can never exceed offer prices.
• Bid prices are always lower than offer prices.

How is the spread calculated in trading?

• The spread is the average of the bid and ask prices.

• The spread is the sum of the bid and ask prices.

• The spread is calculated by subtracting the bid price from the ask price.

Which statement is true regarding market liquidity?

• Lower liquidity results in a narrower spread.

• Higher liquidity typically results in a narrower spread.

• Liquidity has no effect on bid-offer prices.

Who are price makers in the money market?

• Financial institutions like banks and large financial firms.
• Retail investors and individual traders.
• Government agencies and regulators.
• Small businesses and startups.

Which of the following best describes a market maker?

• A trader who only sells securities.

• A trader who only buys securities.

• A trader who provides liquidity by being ready to buy and sell at any time.

What does a wider spread typically indicate about a market?

• Higher liquidity and more participants.

• Lower liquidity and potentially higher risk.

• Stable prices and low volatility.

Who are price takers in the money markets?

• High-frequency traders and hedge funds.
• Large corporations and banks.
• Government agencies and regulators.
• Small investors and institutions.

How the money market securities are traded?

• Money market securities are traded only between banks.
• Money market securities are traded through public auctions.
• Money market securities are traded in the over-the-counter market.
• Money market securities are traded on stock exchanges.