#1
Which of the following is considered a money market instrument?
Treasury Bills
ExplanationTreasury Bills are short-term debt securities issued by governments to raise funds and are a key money market instrument.
#2
What is the primary purpose of a money market mutual fund?
Facilitating short-term borrowing by individuals and institutions
ExplanationMoney Market Mutual Funds facilitate short-term borrowing for both individuals and institutions by investing in various money market instruments.
#3
What is the main function of a money market hedge?
To protect against currency exchange rate fluctuations
ExplanationThe primary purpose of a money market hedge is to safeguard against currency exchange rate fluctuations, reducing potential financial risks.
#4
Which of the following is a characteristic of a money market mutual fund?
Daily share price fluctuations
ExplanationMoney Market Mutual Funds may experience daily share price fluctuations, reflecting changes in the value of the underlying money market instruments in their portfolio.
#5
What is the typical maturity period of a Treasury Bill?
30 days
ExplanationTreasury Bills typically have a short maturity period, commonly around 30 days, making them attractive for short-term investments.
#6
Which money market security represents an ownership interest in a pool of mortgages?
Mortgage-Backed Securities
ExplanationMortgage-Backed Securities represent ownership in a pool of mortgages, providing investors with exposure to the real estate market.
#7
Which money market instrument is often used by governments to manage short-term cash flow?
Treasury Bills
ExplanationGovernments often use Treasury Bills to manage short-term cash flow due to their low-risk nature and short maturity periods.
#8
What is the role of a money market dealer or broker?
Facilitating the buying and selling of money market instruments
ExplanationMoney market dealers or brokers play a crucial role in facilitating the buying and selling of various money market instruments.
#9
What is the purpose of a certificate of deposit (CD) in the money market?
To allow banks to raise short-term funds
ExplanationCertificates of Deposit enable banks to raise short-term funds by offering interest-bearing deposits with fixed maturity dates.
#10
Which of the following is a characteristic of commercial paper?
High liquidity
ExplanationCommercial Paper is known for its high liquidity, making it easily tradable in the money market.
#11
Which of the following is an example of a repurchase agreement (repo)?
Selling securities with an agreement to buy them back
ExplanationA repurchase agreement involves selling securities with a commitment to repurchase them at a specified future date, commonly used in the money market.
#12
In the context of money market instruments, what does the term 'Yield' refer to?
The annual interest rate on a security
ExplanationYield in the context of money market instruments refers to the annual interest rate earned on a security, indicating its return to investors.