ve Doc Sharing Dropbox Journal Webliography Tech 3) 7. Which statement does not

Question

ve Doc Sharing Dropbox Journal Webliography Tech 3) 7. Which statement does not describe banker's acceptances? (Points O It is an order to pay a specified amount of money to the bearer on a given date. O It is a relatively new money market security, having developed only in the late 1970s, but having expanded continuously since. They can be bought and sold until they mature, ie, there is a relatively active secondary market. O Their primary use is in international trade 8. Which of the following is not true of commercial paper? (Points: 3) O it matures in nine months (actually 270 days) or less O it is issued by only the largest and most creditworthy corporations O it is normally collateralized (secured) by U.S. Treasury bills O it normally yields a higher return than T bills 9. Which of the following is not a characteristic of money market securities: (Points : 3) they are short ternm they are highly liquid they are normally traded in very large denominations (i.e., high dollar transactions) they are risk free all the above are characteristics of money market securities 10. An important financial institution that assists in the initial sale of securities in the primary market is the: (Points : 3) investment bank commercial bank

Explanation / Answer

7)

Banker's acceptance is a promised future payment which have been guaranteed and accepted by a bank. It specifies the amount of money, the date of payment and the person to whom payment is due.

Banker's check is a money market security which has been in use since 12th century. Hence it is not a new money market security.

The holder of banker's acceptance can sell it for cash to other buyers who can wait until the maturity.

Banker's acceptance is widely used in international trade as it makes the transaction between two unknown parties safer. For example, an importer can draft a banker's acceptance when it does not have close relationship with the exporter and cannot obtain credit. With banker's acceptance exporter's are sure that they will be paid on time.

Thus the second option is an incorrect statement about bankers acceptance and hence answer is the second option.

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