Questions 1 to 10 are wrong. Rewrite each statement to make it true. This can be as simple as a word change or more complex. The Federal Reserve entered into a pension agreement with the Bank of Transylvania, in which the Fed purchased government bonds from the bank at a price of $9,967,500, which promised to buy back the securities 21 days later at a price of $10,000,000. What will be the return on the equivalent bond on the repo? Pension transactions have no risk of default or liquidity risk and are secured, so their return is the lowest of all money market securities. How are the rates for federal funds and pension transactions indicated? Some money market stocks have active markets. In general, how are most exchanges arranged on the money market? The majority of money market securities are low unit and low-risk investments designed to target individual investors with excess liquidity. Negotiable CDs are issued in unit values between $100,000 and $10,000,000, with $250,000 being the most popular because it is the maximum FDIC insurance. Recently, the Federal Reserve used commercial securities to deal with a temporary liquidity crisis that developed when corporate taxes matured and a cash offer was accepted. If an IF uses the Fed Funds market, it negotiates directly with the Federal Reserve via Fedwire.
Monetary security prices and yields are more sensitive to changes in interest rates than to long-term corporate bonds. Converting the discount yield of a T-Bill to bond equivalent yield results in a decline in yield. A T-bill with a face value of $1,000,000 and a maturity of 225 days currently has a discount return of 4.25 per cent. What is the market price of this T-bill and what is the equivalent rate of borrowing? One bank issued a 9-month, $4 million tradable CD with a reported annual interest rate of 0.67 percent. Remember that negotiable CDs are individual payment instruments. How much does the CD holder receive when he matures and what is the CD bond equivalent rate? What are the typical or common maturities of the following money market securities? Questions 11 to 14 are problems to be solved. Please insert your work if you want a partial credit if the final answer is wrong. In other words, if you only write one answer number, it`s either right or wrong. RKO, Inc.`s commercial paper has 75 days to mature at $500,000.
The current market price is $492,500. Calculate the discount yield and debt-equivalent return of this trade document.