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15 Cards in this Set
- Front
- Back
Name 3 instruments that trade on the money market or the market for short-term debt instruments (one year or less)?
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1. large denomination certificates of deposit
2. federal funds 3. bankers acceptances |
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What are bankers acceptances (BA)?
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a vehicle created to facilitate commercial trade transactions
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What are the four groups that US banks can be classified into?
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1. money center banks- raise funds from domestic and international money markets, rely less on depositors
2. regional banks- rely on deposits 3. Japanese banks- city banks, local banks, long-term credit banks, trust banks and mutual banks 4. Yankee banks- foreign banks with US branches |
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What is a certificate of deposit (CD)?
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financial asset issued by a bank or thrift that indicates a specified sum of money has been deposited at the issuing depository institution; help finance bank activities; no maximum maturity, minimum is 7 days
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What is a negotiable CD?
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allows initial depositor to sell the CD in the open market prior to the maturity date
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What are the four types of CDs?
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1. CDs issued by domestic banks
2. CDs denominated in US dollars but issued outside the US; Eurodollar CDs 3. CDs denominated in US dollars and issued by a foreign bank with a branch in the US; Yankee CD 4. CDs issued by savings and loan associations and savings banks; Thrift CDs |
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What are term CDs?
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CDs issued with a maturity greater than one year
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What is a floating-rate CD (FRCD)?
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CD whose interest rate changes periodically in accordance with a predetermined formular that indicates the spread above some index at which the rate will reset periodically
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What is the London interbank offered rate (LIBOR)?
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the rate paid on Eurodollar CDs; viewed globally as the cost of bank borrowoing since they are effectively the rates at which major international banks offer to pay each other to borrow money by issuing a Eurodollar CD with given maturities
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The yields on CDs depend on what 3 factors?
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1. credit rating of the issuing bank
2. maturity of the CD 3. supply and demand for the CD |
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What are prime CDs?
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issued by highly rated domestic banks; trade at a lower yield than nonprime CDs; Yankee CDs trade at a higher yield than domestic CDs because of unfamiliarity
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Why is the federal funds rate higher than the repo rate?
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in repo, lender has a security as collateral
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What is the effective funds rate?
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rate most often cited for the fed funds market; usually first to move of rates
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What is accepting financing?
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the use of a bankers acceptance to finance a commercial transaction
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What are accepting banks?
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a bank that creates a bankers acceptance
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