Question

1a. Treasury Inflation-Protected Securities (TIPS)

		pay a fixed interest rate for life.
		pay a variable interest rate that is indexed to inflation but maintain a constant principal.
		provide a constant stream of income in real (inflation-adjusted) dollars.
		have their principal adjusted in proportion to the Consumer Price Index.
		provide a constant stream of income in real (inflation-adjusted) dollars and have their principal adjusted in proportion to the Consumer Price Index.

1b.

Which one of the following is not a money market instrument?

		Treasury bill
		Certificate of deposit
		Commercial paper
		Treasury bond
		Eurodollar account

1c.

T-bills are financial instruments initially sold by ________ to raise funds.

		commercial banks
		the U.S. government
		state and local governments
		agencies of the federal government
		the U.S. government and agencies of the federal government

1d.

Commercial paper is a short-term security issued by ________ to raise funds.

		the Federal Reserve Bank
		commercial banks
		large, well-known companies
		the New York Stock Exchange
		state and local governments

1e.

1. Deposits of commercial banks at the Federal Reserve Bank are called

   		bankers'acceptances.
   		repurchase agreements.
   		time deposits.
   		federal funds.
   		reserve requirements.

Answer 1

Answer:

1)

provide a constant stream of income in real (inflation-adjusted) dollars and have their principal adjusted in proportion to the Consumer Price Index.

2)

Treasury bond is not a money market instrument

3)

T-bills are sold by the US Government

4)

Commercial paper is a short-term security issued by large well known companies

5)

The federal funds are required for the bank to meet reserve requirements, which is a way of influencing the money supply. No substitutesfor fed funds are permitted