Question

A __________________ provides a source of short-term funds for commercial banks. Initially developed to tap temporary surplus funds held by large corporate and wealthy individuals. Although investors in this kind of instrument will not (normally) have the possibility of withdrawal before maturity, they may sell them in secondary markets.

Eurodollar deposits

Commercial Paper

Negotiable CDs

Federal funds

None of the options is correct.

You invest in a savings instrument in which you firstly make a lump sum payment. This amount is invested (i.e. by a manager) in different assets and at a later point you receive a stream of income. This is known as:

a leveraged buyout.

an annuity.

the net asset value.

a hedge fund.

None of the options is correct.

Answer 1

A. Negotiable Certificate of deposits Option c is correct Option

Eurodollar deposit is wrong because It the deposit in dollars in banks outside US.
Commercial Paper is wrong because these instruments are used by corporate to raise short term capital.
Federal funds is wrong because these are funds raised by banks to meet their reserve requirements.

B. An annuity is correct option Option B is correct
Leveraged Buyout is wrong because it involves buying another company or entity using debt funding.
Net asset value is the net of assets minus debt and it is primarily used in Mutual funds.
Hedge fund is wrong option as it pools funds from investors to invest in optimally risky funds.