Question

The Money Markets is the market of short term debt. Hence, a high denomination, low risk...

The Money Markets is the market of short term debt. Hence, a high denomination, low risk and liquid call option expiring in one week is expected to trade in this market.

Is this True or False?

I know everything is true up until the "liquid call option expiring in one week is expected to trade in this market" part. This I don't know about, and I couldn't figure out. Do you know?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

FALSE: It is mixing up futures & options (F&O) market with money market.
Let’s understand about F&O - A Call Option is In-the-money when the spot price of the asset is higher than exercise price.

A put option is in-the-money when the exercise price is below the strike price.

Option market is a completely different market which is traded on the premium paid on an underlying asset. Whereas in money market highly liquid financial instruments having short maturities are being traded.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
-Money markets are used to buy and sell assets that are short-term in duration but higher...
-Money markets are used to buy and sell assets that are short-term in duration but higher risk than ordinary assets. True or False -Government Agency Revenue Bonds are backed by the full faith and credit of the government entity issuing the bonds. True or False -Bond rating agencies are separated from government and corporate organizations to ensure they possess no conflicts of interest. True or False -Equity can be valued in a similar fashion to real estate. True or False
The liquidity effect: 1) refers to the initial short-term effect of a decrease in the money...
The liquidity effect: 1) refers to the initial short-term effect of a decrease in the money supply when interest rates rise 2) refers to the initial short-run effect of an increase in the money supply on interest rates 3) decreases the amount of excess cash individuals hold when interest rates drop 4) has no effect on the demand for bonds In the equation of exchange: 1) M = marginal revenue, V = velocity of trade. P = price level, T...
1) Derivative markets differ from stock and bond markets in that: A. derivative products are a...
1) Derivative markets differ from stock and bond markets in that: A. derivative products are a zero sum game B. derivatives are not issued by the company that the contracts relate to C. both A and B D. none of the above 2) An investor buys a Call option on a stock for $5. The strike price is $40 per share. On the expiry date the market price of the stock is $42 per share. A. The investor has made...
demographic markets – the Urban and Rural markets. As such, in each market, you run a...
demographic markets – the Urban and Rural markets. As such, in each market, you run a short survey that gauges customers demand for your product and assigns them to one of three categories – (i) High (ii) Medium or (iii) Low. You survey 120 people in the “Urban” market and find that their demand falls into the following “buckets” High 42 Medium 36 Low 42 You survey 80 people in the “Rural” market time. Their demand for the product its...
A federal deficit occurs when:​ Select one: a. ​money supply in the market is low. b....
A federal deficit occurs when:​ Select one: a. ​money supply in the market is low. b. ​stock prices of private companies decrease. c. ​social security benefits given to citizens are reduced. d. ​a government's expenses are more than its tax revenues. e. ​a government issues securities to the public. A normal yield curve that is upward sloping implies that:​ Select one: a. ​the returns on long-term securities are equal to the returns on short-term securities of similar risk. b. ​the...
Topic: Open Market Supply SHANGHAI -- Money markets are often described as the financial system's plumbing....
Topic: Open Market Supply SHANGHAI -- Money markets are often described as the financial system's plumbing. When they work, which is most of the time, hardly anyone notices, but when they get blocked up, it creates quite a stink. That is why China's money market -- in which banks and other financial institutions borrowed some $6.4 trillion from each other last month alone to fund their daily needs -- is becoming one of the world's most important markets to watch....
1. State whether the below sentences are True or False and justify your answer in detail....
1. State whether the below sentences are True or False and justify your answer in detail. a) According to put-call parity, a long position in a call option combined with a short position in a put option equals a long position in the commodity combined with a short position in a bond with a face value equal to the strike price. (10%) b) If the convenience yield of an underlying commodity increases, then a long put option position will lose...
21. Which of the following is not a short-term debt instrument? Group of answer choices commercial...
21. Which of the following is not a short-term debt instrument? Group of answer choices commercial paper common stock money market securities Treasury bills 22. Which of the following is a primary market transaction? Group of answer choices You sell 200 shares of IBM stock on the NYSE through your broker. You buy 200 shares of IBM stock from your brother. The trade is not made through a broker—you just give him cash and he gives you the stock. IBM...
Questions Treasury bills are the safest and the most liquid type of short-term investment. The Treasury...
Questions Treasury bills are the safest and the most liquid type of short-term investment. The Treasury issues 13-week T-bills and 26-week T-bills on a regular basis in denominations of $1,000. Dealers bid on the new issues, but smaller investors just accept the average price. If the price of 13-week T-bills is shown to be $99.2, a) what will be the price be? b) Now calculate the yield. Will the 26 week bills probably have a higher yield or a lower...
15. According to our class discussion of empirical findings in stock markets, which of the following...
15. According to our class discussion of empirical findings in stock markets, which of the following statements is (are) correct? (I) Poorly- or well-performing stocks tend to continue abnormal performance over short horizons. (II) Portfolios of high P/E stocks exhibit higher risk-adjusted returns. (III) Larger firms tend to have higher stock returns than smaller firms. (IV) Value stocks usually generate lower returns than growth stocks. (V) Stock prices of firms with negative earnings surprise tend to rise. (a) I only...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT