TRUE or FALSE

1. Money market instruments typically involve greater default risk than capital market instruments.

2. Most federal funds transactions occur between smaller banks that have difficulty meeting the reserve requirements set by the Federal Reserve.

3. Commercial paper is frequently traded in the secondary market.

4. Everything else equal, an effective annual rate will be greater than the bond equivalent yield on the same security.

5. In a Treasury auction, preferential bidding status is granted to competitive bidders.

6. The yield on money market instruments is typically higher than capital market instruments because all money market instruments represent debt that must be repaid in the future.

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