Chapter 3 - Debt Securities Markets

What is the primary characteristic of money market securities?

• They have high default risk

• They are sold in small denominations

• They mature in one year or less

• They are long-term investments

Which of the following is a type of money market instrument?

• Corporate bonds

• Treasury bills

• Municipal bonds

• Long-term notes

Individual investors can participate in the money markets indirectly.

• True

• False

What is the main purpose of issuing commercial paper?

• To raise equity capital

• To provide liquidity for short-term needs

• To finance long-term projects

• To pay dividends

What is a key feature of Treasury bills?

• They pay interest at maturity

• They are backed by the federal government

• They are issued in paper form only

• They have a maturity of more than one year

In a repurchase agreement, what does the seller agree to do?

• Buy back the securities at a higher price

• Hold the securities indefinitely

• Sell the securities at a lower price

• Repurchase the securities at a specified date and price

What is the primary risk associated with commercial paper?

• Inflation risk

• Liquidity risk

• Credit risk

• Interest rate risk

How are Treasury bills typically sold?

• Through private placements

• Through public auctions

• On the stock exchange

• Directly to individual investors

What is the yield on a Treasury bill primarily influenced by?

• The coupon payments

• The difference between selling price and purchase price

• The credit rating of the issuer

• The maturity date

What is a banker's acceptance primarily used for?

• Real estate purchases

• Long-term investments

• International trade transactions

• Domestic transactions