1. Which is an interest-bearing instrument?

1. Commercial paper
2. Eurodollar deposits
3. Government paper
4. Banker's acceptances (BAs)

2. What is usually being sold and repurchased in a repurchase agreement (repo)?

1. Floating rate notes (FRNs)
2. Commercial paper (CP)
3. Government securities
4. Short-term trade receivables

4. The commercial book-entry system (CBES)

1. provides for the simultaneous transfer of securities against the settlement of funds.
2. is known as indirect holding since the National Book-Entry System (NBES) directly holds all securities.
3. has reduced but not eliminated the potential for theft, loss or counterfeiting of securities.
4. acts as a legal depository for most stock and bond certificates by netting transactions between parties.

5. A large company purchases a significant volume of US Treasury-bills (T-bills) on in the secondary market. Which of the following is the MOST LIKELY effect this action will have on the secondary market for US Treasury Securities?

1. Market price and yield of US Treasury securities will be significantly affected
2. Market price and yield of US Treasury securities will be unaffected
3. The price of short-term US Treasury securities will rise moderately
4. The yield of long-term US Treasury securities will go moderately down

1. 10) When an organization invests in bonds, the market interest rates are at a point where the price of the one-year bond and the ten-year bond happen to be almost the same. Which action would minimize price risk?

1. Purchase the ten-year bonds as this will also minimize reinvestment risk
2. Purchase the ten-year bonds even though this has more reinvestment risk
3. Purchase the one-year bonds as this will also minimize reinvestment risk
4. Purchase the one-year bonds even though this has more reinvestment risk