Fin 9bodie ch2.docVIP

Chapter 02 Asset Classes and Financial Instruments ? Multiple Choice Questions? 1.?Which of the following is/are not characteristic of a money market instrument??A.?LiquidityB.?MarketabilityC.?Long maturityD.?Liquidity premiumE.?Long maturity and liquidity premium ? 2.?You sold a futures contract on oats at a futures price of 233.75 and at the time of expiration the price was 261.25. What was your profit or loss??A.?$1375.00B.??$1375.00C.??$27.50D.?$27.50E.?$1325.00 ? 3.?Treasury Inflation-Protected Securities (TIPS)?A.?pay a fixed interest rate for life.B.?pay a variable interest rate that is indexed to inflation.C.?provide a constant stream of income in real (inflation-adjusted) dollars.D.?have their principal adjusted in proportion to the Consumer Price Index.E.?provide a constant stream of income in real (inflation-adjusted) dollars and D have their principal adjusted in proportion to the Consumer Price Index. ? 4.?Which one of the following is not a money market instrument??A.?A Treasury billB.?A negotiable certificate of depositC.?Commercial paperD.?A Treasury bondE.?A Eurodollar account ? 5.?T-bills are financial instruments initially sold by ________ to raise funds.?A.?commercial banksB.?the U.S. governmentC.?state and local governmentsD.?agencies of the federal governmentE.?the U.S. government and agencies of the federal government ? 6.?The bid price of a T-bill in the secondary market is?A.?the price at which the dealer in T-bills is willing to sell the bill.B.?the price at which the dealer in T-bills is willing to buy the bill.C.?greater than the asked price of the T-bill.D.?the price at which the investor can buy the T-bill.E.?never quoted in the financial press. ? 7.?The smallest component of the money market is?__________.A.?repurchase agreementsB.?small-denomination time depositsC.?savings depositsD.?money market mutual fundsE.?commercial paper ? 8.?The smallest component of the bond market is?__________.A.?Trea