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13 Cards in this Set
- Front
- Back
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What is laddering?
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Purchasing large amounts of CDs with varying terms to maturity. This enables the investor tomore effectively manage the interest rate risk associated with a fixed income cash equivalent, such as a CD
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What are negotiable CDs
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Deposits of $100K or more placed with commercial banks at specified interest rate for a term of 14 days to 12 months.. Bought most often by institutal investors. These CDs are bought and sold in a secondary market.
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What is a money market mutual fund?
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Provides a modest rate of return, diversification, liquidity. It is not insured by the FDIC. The avg maturity date is 30-90 days. Money markets at banks are insured by FDIC
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What are treasury bills?
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Government securities with 1-year or less maturity. Sold at a discount, taxed by fed at maturity but not taxed by state. Used as the proxy for risk free investment.
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What is commercial paper?
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Negotiable, st, unsecured promissory note issued by a large corporation--usually to finance inventory or accounts receivable. Isjsued at $100Kj or more.
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What are repos?
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Very st Used by security dealers to finance large inventories of securities. .Dealers will sell government securities to another dealer with an agreement to buy them back at a later date at an agreed on price. The buyer of the repo receives the equivalent of a fixed yield or ROI. Short maturity and very low risk. usually government securities
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What is a banker's acceptance?
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Short term drafts drawn by a private company on a major bank used to finance imports and exports. Traded at a discount in the secondary market. St line of credit. Companies that are too small to issue commercial paper use banker's acceptances to finance their short term debt needs.Slightly higher interest rate than commercial paper
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What are Euro dollars?
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us dollar denominated deposits at banks outside the us. Ususally very large with a maturity of less than 6 months. Less liquid but higher yield than domestic CDs
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What is a euro CD?
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similary torgular cd except that it is the liability of a non us bank. pays higher yield than domestic cd.
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How are treasury bills issued and tax
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Issued at discount. Taxed at maturity. If sold b4 maturity, taxed at ordinary income
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What are nonnegotiable CDS
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common cdsterms=0 to 5 years. Purchased by individuals and small business. not marketable or redeemable. Get above line tax deduction for forfeiture interest on premature withdrawals
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What treasury securities are zero coupon
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T bills
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In what denominations are T notes sold
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$100 and they have semi annual coupon rates
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