The higher yields on Eurodollar deposits compared with nearly all other marketable securities, governmental or nongovernmental, with similar maturities are attributable to 1. the fact that the depository banks are generally less closely regulated than U.S. banks and are therefore more risky, and 2. some foreign exchange risk may be present. Indicate whether the statement […]
A customer sends payment to a post office box which is emptied by a firm’s bank daily. The bank then processes the payments and notifies the firm of the day’s collections. This collection technique is known as ________. A) a direct send B) concentration banking C) the lockbox system D) controlled disbursing ANSWER […]
When people describe what they think an exchange rate value should be, they often use a benchmark model, known as ________. A) purchasing power parity B) interest rate parity C) the Fisher effect D) the International Fisher effect ANSWER Answer: A
Why is it true that the hypothesis that the forward exchange rate is an unbiased predictor of the future spot exchange rate is equivalent to the hypothesis that the forward premium (or discount) on a foreign currency is an unbiased predictor of the rate of its appreciation (or depreciation)? ANSWER Answer: When the […]
When managing accounts payable, a good strategy would be to ________. A) pay as early as possible creating better credit rating for a firm B) pay as slowly as possible without damaging a firm’s credit rating C) pay big customers early to maintain good relations and small customers on a later date D) pay only […]
To be truly marketable, a security must have three basic characteristics: a ready market, risk-free, and safety of principal. Indicate whether the statement is true or false ANSWER FALSE
Marketable securities are short-term, interest-earning, money market instruments that can easily be converted into cash. Indicate whether the statement is true or false ANSWER TRUE
Since Treasury bills are issued in bearer form, they are considered to be virtually risk-free. Indicate whether the statement is true or false ANSWER FALSE
The yields on Treasury bills are generally higher than those on any other marketable securities due to their virtually risk-free nature. Indicate whether the statement is true or false ANSWER FALSE
Federal agency issues are obligations of the U.S. Treasury and are readily accepted as low-risk securities. Indicate whether the statement is true or false ANSWER FALSE
