oldings of government bonds are classified on a bank's balance sheet as Group of answer choices assets, because investing in government bonds represents a use of funds for investment. liabilities, because the bank must borrow in order to be able to invest in the government bonds. assets, because the markets for government bonds are the most liquid in the world. liabilities, because the government bonds mus
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- What are some of the ways that banks can borrow short-term funds when they need "liquidity"?(Select all that apply; three of the answers below are correct.) Reference: Chapters 11 & 12 They can borrow directly from the Securities & Exchange Commission through the "regulatory" market. They can borrow from the Department of Treasury through the "Treasury" window. They can borrow another bank's reserves through the "fed funds" market. The can engage in a "sale & repurchase agreement" (or "repo") by selling some of their securities to another financial insitution and promising to buy them back the next day. They can borrow directly from the Federal Reserve through the "discount window".Do you think issuing bonds by the government is effective and does it achieve its purpose?STRIPS are: a) Government-backed schemes that allow investors to hedge against market risk. b) Government bonds linked to inflation rates. c) Tax-free saving accounts aimed at increasing retirement income d) Corporate bonds
- The amount of loans that a bank can create is limited by Select one: laws enacted by Parliament. O b. the monetary base, the bank's desired reserves and desired currency holding. O c. the real interest rate. O d. the bank's holding of government securities. O e. only the monetary base Next pageExplain how the bond market facilitate government (fiscal) policies. How do you think the bond market could discipline a government & discourage the government from borrowing (& spending) excessively?The discount rate is the rate that the O Fed charges member banks. Fed charges the Treasury for sales of securities. O Fed charges on government securities. O Treasury pays on savings bonds
- What is a credit default swap (CDS)? A form of insurance against governments and corporations going bust. A type of stock investment used to hedge short positions. A form of government regulation promoting ESG compliance.Financial instruments are assets that have a monetary value or record a monetary transaction. To coordinate the exchange of capital between borrowers and lenders, financial instruments trade in the financial markets. These financial instruments can be categorized on the basis of their issuers, maturity, risk, and other factors. Identify the financial instruments based on the following descriptions. Backed by the U.S. government, these financial instruments are short-term debt obligations with a maturity of less than one year. They are considered risk-free investments. State and local government bonds, U.S. Tresury, U.S. Tresury notes and bonds Issued by money-centered financial firms, these short- or medium-term insured debt instruments pay higher interest than a regular savings account. They are low-risk instruments and have low returns. Money Market Mutual Funds, Certificates of Deposit, Commercial Paper These financial instruments are investment pools that buy such…Commercial banks obtain funds to make loans from all the following sources except Multiple Choice funds borrowed from the Federal Reserve Bank. money deposited by their borrowers. direct appropriations from the federal government. equity capital of the bank's owners.
- The financial markets play an important role in channeling funds from savers to borrowers. Which of the following illustrates this function of financial markets? Investors purchase assets like real estate and gold from other investors. Investors purchase capital goods which are used in production by borrowers. Investors deposit funds into interest-bearing accounts which are then loaned to borrowers. Investors purchase securities that are issued by firms and governments.National governments issue debt securities known as sovereign bonds, which can be denominated in either local currency or global reserve currencies, like the U.S. dollar or euro. (source (Links to an external site.)Links to an external site.). For this discussion question, first define what these bonds are. Why are these issued? Then discuss the issues that can arise when investors invest in these types of bonds. What are the advantages and disadvantages of these bonds? Are there unique issues that can arise only with this type of bond? Would you invest in sovereign bonds?Classify the following financial instruments as money market securities or capital market securities: Banker’s acceptances Commercial paper Common stock Corporate bonds Mortgages Negotiable certificates of deposit Repurchase agreements U.S. Treasury bills U.S. Treasury notes Federal funds