Question Status: New The higher a securitys price in the secondary market the more funds a firm can raise by selling securities in the primary market. Only (a) and (b) of the above are true. Comparison of banker's discount with true discount (as per present value), Veale, Stuart R. (2001). Question Status: Previous Edition Which of the following statements about financial markets and securities are true? consumer and business loans. asymmetric information. Advances under the revolving operating credit facility are subject to certain conditions of drawdown, and may be made by way of Canadian prime rate loans, Dictionary, Encyclopedia and Thesaurus - The Free Dictionary, the webmaster's page for free fun content, Liquidity Management Mechanisms of Islamic and Conventional Finance: A Shariah Appraisal, The money market instruments and money stock in Nigeria: comparative analysis of the regulation and deregulation periods, Determinants of financial system liquidity (1980-2005): evidence from Nigeria, The effect of substitute assets on yields in financial markets, The call loan market in the U.S. financial system prior to the Federal Reserve System, Origins of the use of treasury debt in open market operations: Lessons for the present, Bankers' acceptance financing - the link to financing global market activity, Short term deposits decreased and long term deposits increased -- Central Bank, Moody's says China's shadow banking has stopped growing, -Atrium Mortgage Investment enters new revolving operating credit facility, Banking and Securities Industry Committee, Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Bankers' Association for Finance and Trade, Bankers, Insurance & General Workers Union. Which of the . Question Status: Previous Edition Which of the following statements about financial markets and securities are true? Which of the following instruments are traded in a capital market? adverse selection. all of the above. All of the following statements are true about commercial paper EXCEPT commercial paper: A. is a funded debt of the issuerB. The customer wishes to know if the CD is FDIC insured. After acceptance, the request becomes an unconditional liability of the bank. premiums from policies. Question Status: Previous Edition The countries that have made the least use of securities markets are Germany and Japan; in these two countries finance from financial intermediaries has been almost _____ times greater than that from securities markets. A bond is a long-term security that promises to make periodic payments called dividends to the firms residual claimants. A corporation acquires new funds only when its securities are first sold in the primary market. Treasury BillsB. discounting. B) It must be payable on demand or at a fixed or determinable future date. Under a reverse repurchase agreement, the dealer is buying securities from the Federal Reserve (instead of selling), draining the dealer of cash. If the borrowing arrangement is all-inclusive and involves a dealers commission and backup costs, for example, in the case of commercial paper, the formula is again adjusted as follows: $$ \text{Cost}=\cfrac {\text{Interest}+\text{Dealers commission}+\text{Backup costs} }{\text{Loan amount}-\text{Interest}} $$. C) bill of lading. A) affiliated party B) unaffiliated unknown party C) known unaffiliated party D) domestic supplier, Polaris Corporation has made an agreement to ship goods to a foreign firm with whom they have not entered into a contract for three years. An insurance company buys shares of common stock in the over-the-counter markets. Question Status: Previous Edition. A) bill of lading B) draft C) banker's acceptance D) line of credit. interest rates charged are most similar to the Federal Funds rateD. "Investments", page 28, 6th Canadian Edition. Short term debts are said to be unfunded debts. free-rider problem. ? disclosure. they do each of the above. D) initiate the sale. financial stability. They can both be long-term financial instruments. The Office of the Comptroller of the Currency The Federal Reserve System The National Credit Union Administration State banking and insurance commissions Each of the above ? ? True Eurodollars are dollar denominated, foreign-owned deposits in U.S. Banks. Negotiable certificates of deposit (over $100,000 face amount) are issued at par and mature at par plus accrued interest. This makes it much less expensive for an issuer to market the securities, since the regulatory burden is much lower. credit unions. Which of the following is NOT a factor in the discounting of a securitized export receivable? B) drawer. Expand the money supply. Both (b) and (c) of the above. Question Status: New The primary assets of money market mutual funds are stocks. An insurance company buys shares of common stock in the primary markets. Regardless, at maturity, the CD is redeemed at par. An exporter has just received a banker's acceptance created by an international transaction. Also, Eurodollar bond offering interest rates are typically based on LIBOR plus a spread. protect bank employees from unemployment. Office of the Comptroller of the Currency. Question Status: New In the United States loans from _____ are far _____ important for corporate finance than are securities markets. LIBOR stands for the London Interbank Offered Rate which is the rate on which most Eurodollar loans are based. Which of the following money market instruments trades at par plus accrued interest? corporations get more funds through equity financing than they get from financial intermediaries. None of the above. the only thing we have to fear is fear itself. Tax Anticipation NoteC. Certificate of DepositC. They both involve a claim on the issuers income. Federal Funds are overnight loans of reserves from: A. C) the export contract is signed. Monetary and Nonmonetary Benefits Affecting the Value and Price of a Forward Contract, Concepts of Arbitrage, Replication and Risk Neutrality, Subscribe to our newsletter and keep up with the latest and greatest tips for success. Banker's Acceptance - Overview, How it Works, Investing Tool ? Question Status: Revised The primary liabilities of a commercial bank are bonds. B) drawer. D) be issued by the bank at the request of an exporter. Which of the following actions by the Federal Reserve will tighten credit? stocks. Question Status: Previous Edition Financial markets improve economic welfare because they allow funds to move from those without productive investment opportunities to those who have such opportunities. A corporation buys a short-term security issued by another corporation. Bankers acceptances U.S. Treasury Bills Eurodollars Commercial paper None of the above ? An exporter has just received a banker's acceptance created by an international transaction. All of the above. Upon receipt of his next account statement, the customer sees that the market value of the CD is shown as $99,800. They both involve a claim on the issuers income. Question Status: Previous Edition Federal funds are funds raised by the federal government in the bond market. A pension fund manager buys a short-term security from the issuing corporation. Answer: C, The Export - Import Bank is an independent agency of the U.S. government established in 1934 to. A corporation buys a short-term security issued by another corporation. create a market for newly constructed houses. in the secondary market by a securities dealer. Bank commercial loans Bankers acceptances State and local government bonds Residential mortgages. risk. The maturity of a debt instrument is the number of years (term) to that instruments expiration date. ? Repos do have interest rate risk, relating to the underlying securities. t/f: Because most international transactions are between affiliated parties, international transaction contracts are less complex, but the management of the total value of the MNE is more complex. Commercial paper is quoted on a yield basis. Which of the following relationships between importing and exporting parties would require the least detailed contract to conduct business? C) free the seller from any merchandise guarantees. financial intermediaries; securities markets financial intermediaries; government agencies government agencies; financial intermediaries government agencies; securities markets ? Question Status: Previous Edition Which of the following can be described as involving indirect finance? all of the above. https://financial-dictionary.thefreedictionary.com/Bankers%27+Acceptances, A short-term credit instrument created by a nonfinancial firm and guaranteed by a bank as to payment. What is a Bankers Acceptance? Theblogy.com When a government dealer enters into a repurchase agreement with the public, the dealer is getting liquid by selling government securities to the customer, with an agreement to buy them back at a later date. Question Status: Previous Edition The primary assets of a finance company are municipal bonds. free-riding. only (a) and (b) of the above. The Federal Reserve is adding liquidity to the system. Question Status: New The purpose of the disclosure requirements of the Securities and Exchange Commission is to increase the information available to investors. Only (b) and (c) of the above are true. 12.5%. asymmetric information. A. Maturity (payback) dates are normally between 1 day and 270 days (9 months). Solved 16. Small, undercapitalized firms a. Are generally - Chegg Bankers Acceptances are: -drafts on banks used to finance imports and exports -negotiable securities The LEAST liquid money market is: Banker's Acceptances Prime Banker's Acceptance is: -eligible for trading with the Federal Reserve -negotiable Jumbo certificates of deposit are: three four five ten ? the interest rate charged is most similar to the Federal Funds rateC. Abbreviation: BA See more. The principal payment may be reducedC. commercial bank to broker-dealerD. A) unaffiliated known. The three parties to a letter of credit are A) issuing bank, seller, and applicant. A) Clean; new trading partners B) Documentary; their own affiliates C) Clean; their own affiliates D) None of the above, t/f: Most drafts in international trade are "clean", Drafts that have been accepted by banks become. Question Status: Study Guide Typically, borrowers have superior information relative to lenders about the potential returns and risks associated with an investment project. ? In an agreement whereby goods will be sold at a future date, if the buyer does not have an established relationship with or otherwise cannot obtain credit from the seller, a banker's acceptance enables it to substitute the bank's creditworthiness for its own. A corporation takes out loans from a bank. Question Status: Previous Edition Securities are _____ for the person who buys them, but are _____ for the individual or firm that issues them. U.S. government securities. C) banker's acceptances. Long Term Bond Offered RateB. rapid economic growth. The interest rate on such agreements generally parallels and is somewhat lower (since the loans are secured) than the Fed funds rate, since overnight loans using government securities are most similar to overnight loans of reserves (Fed Funds) from bank to bank. risky. All of the following securities are eligible for trading by the Federal Reserve EXCEPT: A. adverse selection. In the People's Republic of China, banker's acceptance notes have become a shadow currency with captive banks of local governments issuing BA's to hide their debt levels.[5]. risky assets into safer assets. Life insurance companies Credit unions Pension funds State and local government retirement funds ? 146 which of the following instruments are traded in - Course Hero Answer: C. A/An ________ letter of credit is intended to serve as a means of arranging payment, but not as a guarantee of payment. Question Status: Previous Edition Which of the following are short-term financial instruments? Securities that are eligible to be traded by the Federal Reserve are those backed by the guarantee of the U.S. Government as well as certain agency obligations. Question Status: New A goal of the Securities and Exchange Commission is to reduce problems arising from competition. Both (a) and (c) are correct. A. finance companies, mutual funds, and money market funds. equity and bond financing play such an important role in financial markets. To loosen credit the Federal Reserve will: A. sell U.S. Government securities to bank dealers with an agreement to buy them back at a later dateB. D) none of the above. sell at a discount because they have no interest payments. demand deposits used to finance the issuance of ADRs. a. Banker's acceptances b. U.S. Treasury bills c. Negotiable certificates of deposit d. Commercial paper Show transcribed image text Expert Answer Step 1 Option B and D Tresury bill is a bond instrument whose maturity varies . When the dealer attempts to resell the securities, it can incur a substantial loss. C) The historic collection risk of the exporter. ? If the CD is titled in the brokerage firms name, then the insurance coverage would not apply! ? resource allocation. ? These instruments have been a popular investment for money market funds. D) It channels funds from lenders-savers to borrowers-spenders. Lowest Interest Borrowing Offered Rate. diversification. ? Overnight repurchase agreements are typically effected between government securities dealers. Question Status: Previous Edition The Federal Deposit Insurance Corporation (FDIC) regulates savings and loan associations. If the drawee is a bank, the acceptance is called a banker's acceptance. All content on this website, including dictionary, thesaurus, literature, geography, and other reference data is for informational purposes only. the issuer loses control of the underlying securities for the duration of the agreement. can be explained by all of the above. deposits. The maximum maturity is 90 daysD. C) transfer title. Question Status: Previous Edition The primary assets of credit unions are municipal bonds. Answer: D. Because of their short terms to maturity, the prices of money market instruments tend not to fluctuate wildly. C) sight draft. Commercial paper has a maximum maturity of 90 daysB. external financing for corporations is dominated by securities issues. Treasury BillsC. short-term investments. A) clean drafts. The ________ is issued to the exporter by a common carrier transporting the merchandise. Treasury NotesC. consumer and business loans. only (a) and (b) of the above. ? Since the interest rate on the instrument is fixed at issuance, if market interest rates rise, then the price of this instrument must fall to bring its yield up to current market levels. A corporation takes out a loan from a bank. D) originator. Question Status: Previous Edition Which of the following financial intermediaries are depository institutions? Since the 7.85% cost for the bankers acceptance is the lowest of the three options, the bankers acceptance has the lowest cost of credit. Question Status: New An important financial institution that assists in the initial sale of securities in the primary market is the investment bank. You buy a U.S. Treasury bill from the U.S. Treasury. If the banker's acceptance has a face value of $250,000, current rates on banker's acceptances are 6%, and the bank charges a commission of 1% per annum, how much will the exporter receive if he sells the acceptance in the secondary market six months prior to maturity? Which of the following securities would be assigned a P (Prime) rating? are only (b) and (c) of the above. ? financial regulations are unnecessary. You buy a U.S. Treasury bill from the U.S. Treasury. only (a) and (b) of the above. moral hazard adverse selection diversification free rider bureaucratic behavior ? C) buyer and seller may act in collusion. fluid. If interest rates rise, the underlying securities can decline in value. Answer: B ( b ) Banker 's acceptances Question Status: Previous Edition 147) Which of the following instruments is not traded in a money market? Money market discount instruments are quoted on a: A. yield basisB. After acceptance, the request becomes an unconditional liability of the bank. All of the following statements regarding short term negotiable certificates of deposit are correct EXCEPT: A. the minimum denomination is $100,000B. capital market instrument that is considered funded debtD. A corporation buys a short-term corporate security in a secondary market. ? As a corporation gets a share of the brokers commission, a corporation acquires new funds whenever its securities are sold. Both (a) and (c) of the above. A bank buys a U.S. Treasury bill from one of its depositors. Question Status: Previous Edition Which of the following can be described as involving indirect finance? deposits. As long as the customer does not have deposits at the issuing bank in excess of $200,000 (thus not exceeding the $250,000 maximum FDIC coverage) and the CD is titled in the customers name, then the CD would be FDIC insured. stocks. A dealer who needs cash will sell some of its inventory overnight to another dealer, with an agreement to buy the position back the next day. bonds. moral hazard. money market instrument that is considered unfunded debtC. Interest is paid semi-annually and, again in a declining interest rate environment, if these payments are reinvested in new CDs, the rate of return on reinvested monies will decline - thus they have reinvestment risk. When considering risk and popularity, banker's acceptances rank Money Market: The money market is where financial instruments with high liquidity and very short maturities are traded. 1 : one that engages in the business of banking. ? A pension fund manager buys commercial paper in the primary market. Created by amanda_kristine9 Terms in this set (47) What is a banker's acceptance? Which statement is TRUE regarding a step-down certificate of deposit? Only (a) and (b) of the above are true. Common StockD. Question Status: New Economies of scale enable financial institutions to reduce transactions costs. Question Status: New An example of economies of scale in the provision of financial services is investing in a diversified collection of assets. both (b) and (c) of the above. The dealer gets a temporary infusion of cash, which the dealer can use to buy other securities or (if the dealer is a bank) which may be loaned to someone else. CFA and Chartered Financial Analyst are registered trademarks owned by CFA Institute. ? A pension fund manager buys a short-term corporate security in the secondary market. Question Status: Previous Edition Which of the following financial intermediaries is not a depository institution? ? Which of the following is NOT a requirement for a draft to become a negotiable instrument? A dealer who needs cash will buy some of its inventory overnight to another dealer and is not subject to interest rate risk. money market mutual funds. prevent bank panics. ? Question Status: Previous Edition Savings and loan associations are regulated by the Federal Reserve System. Question Status: Previous Edition If bad credit risks are the ones who most actively seek loans and, therefore, receive them from financial intermediaries, then financial intermediaries face the problem of moral hazard. It is lower than the discount rate since the Fed usually pegs the discount rate at 50 basis points over the Fed Funds rate. C) It allows loans to be made. None of the above. short-term investments. these securities are issued by banks. a low quality issue tied to the prime rate plus a risk premium. A banker's acceptance is a commitment by a bank to make a requested future payment. life insurance companies, fire and casualty companies, and pension funds. Question Status: Previous Edition The countries that have made the least use of securities markets are _____ and _____; in these two countries finance from financial intermediaries has been almost ten times greater than that from securities markets. Import and export financing operations - Santandertrade.com by reducing the exposure of investors to risk. Money Markets: What They Are, How They Work, and Who Uses Them Acceptances are traded at discounts to face value in the secondary market. A debt instrument is short term if its maturity is less than one year. This difference in information is called comparative informational disadvantage. corporate stocks and bonds. A dealer who needs cash will sell some of its inventory overnight to another dealer, with an agreement to buy the position back the next day. are the most liquid of the money market securities. People buy shares in a mutual fund. $101. Prime Bankers AcceptancesB. In the good old days, dealers could do repurchase agreements that were backed by a promise to deliver the underlying securities (a due bill for the securities) instead of making physical delivery. noun (2) What is a banker's acceptance quizlet? Capital market securities are usually more widely traded than shorter-term securities and so tend to be more liquid. Mutual savings banks Credit unions Mutual funds All of the above Only (a) and (b) of the above ? Question Status: Previous Edition Which of the following are investment intermediaries? commercial banks. Question Status: Previous Edition The process of indirect finance using financial intermediaries is called direct lending. shares. A. bond markets. Banker's acceptance. must be registered under the Securities Act of 1934C. The New York Stock Exchange The U.S. government bond market The over-the-counter stock market The options markets None of the above ? Federal Funds. The Eurodollar market is centered in London - and the interest rate paid on these deposits is LIBOR = London Interbank Offered Rate. ? The rate is charged from one Federal Reserve member bank to another member bank. must have a trust indentureD.

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