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Kultur Dokumente
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Federal Funds
Repurchase Agreements Commercial Paper Negotiable Certificates of Deposit
Banker Acceptances
Advantage: provides an investment opportunity that generates a higher rate of interest than holding cash, but it is also very liquid and has relatively low default risk.
McGraw-Hill/Irwin
Issued by the U.S. Treasury to cover government budget deficits and to refinance maturing debt Standard Original Maturities of 13 weeks, 26 weeks, or 52 weeks Denominations are $1,000 but typical round lot is $5 million Virtually default risk free
McGraw-Hill/Irwin
360 h
iT-bill= Annualized yield on the T-bill PF = Price (face value) paid to the T-bill holder PO = Purchase price of the T-bill h = Number of days until the T-bill matures
FEDERAL FUNDS
Short-term funds transferred between FIs, usually for a period of one day Federal Funds rate
the overnight or one day interest rate for borrowing fed funds a focus or target rate in the conduct of monetary policy
Federal Funds Yields
single-payment loans (pay interest only once) Fed fund transactions take the form of short-term (mostly overnight) unsecured loans benchmark interest rate of fed funds among banks
McGraw-Hill/Irwin
McGraw-Hill/Irwin
McGraw-Hill/Irwin
REPO TRADING
J.P. Morgan (Repo buyer/ LENDER) Bank of America (Repo Seller/ BORROWER) T- bills
McGraw-Hill/Irwin
COMMERCIAL PAPER
An unsecured short-term promissory note issued by a corporation to raise short-term cash, often to finance working capital requirements The largest (in terms of dollar value) of the money market instruments Generally sold in denominations of $100,000, $250,000, $500,000 and $1 million with maturities of 1-270 days (if maturity is greater than 270 days, SEC requires registration) Generally held until maturity so there is not an active secondary market
McGraw-Hill/Irwin
McGraw-Hill/Irwin
McGraw-Hill/Irwin
BANKERS ACCEPTANCES
A time draft payable to a seller of goods with payment guaranteed by a bank. Arise from international trade transactions and are used to finance
McGraw-Hill/Irwin
Treasury bills
U.S. Treasury
Commercial banks FRS; Comm banks; Brokers and dealers; Other FIs Comm banks Other FIs; Corps Commercial banks Commercial banks
FRS; Comm banks; MFs Brokers and dealers; Other FIs; Corps Commercial banks FRS, Comm banks; MFs Brokers and dealers Other FIs, Corps Brokers and dealers;MFs Corporations Brokers and dealers;MFs Corps; Other FIs Comm banks; Corps; Brokers and dealers
McGraw-Hill/Irwin
McGraw-Hill/Irwin
COMPUTATIONS
DISCOUNT YIELD for DISCOUNT SECURITIES
idy= [( Pf
Po )/Pf ]x 360/h
ibey=[( Pf
Po )/P0 ]x 365/h
McGraw-Hill/Irwin
COMPUTATIONS
Effective Annual Return
EAR= ( 1 + i/m) ^ m 1
McGraw-Hill/Irwin