(a) Consider an investment of $1 million in a 90-day security made at 5%. The security is

sold five days later to take advantage of a fall in the market yield to 4.5%.

(i) Calculate the buying price.

(ii) Calculate the selling price.

(iii) Calculate the holding period return for this investment.

(b) Explain critically how money market assists banks, large corporations and the

government to manage their liquidity risk. In your explanation, provide an example of

the security for each issuer.