1. The money markets (as opposed to the capital markets) involve securities with maturities of less than five years.

1) True

2) False

2. Money markets:

1) deal strictly in cash or checks

2) deal in short-term (matures in one year or less) securities

3) deal in short-term (matures in eighteen months or less) securities

4) help corporations finance their assets with long-term bonds

3. Non-callable bonds:

1) have a callability risk attached to them

2) are less desirable than callable bonds

3) can be called prior to maturity if holders are given a 120-day notice

4) will have a lower yield than identical callable bonds

4. Finance measures the riskiness of an investment primarily through the riskiness of the investment’s cash flows.

1) True

2) False

5. The Equation of Exchange (Irving Fisher) is:

1) MV = PT

2) MP = VT

3) MT = PV

4) none of the above