5-2 Money Market Instruments United States treasury bills Federal funds Repurchase agreements Commercial paper Prime rate Bankers acceptances Bank certificates of deposit Eurocurrency certificates of deposit Money market funds
5-3 Repurchase Agreements Points in time 2:00 p.m.5:00 p.m.9:00 a.m. January 15January 15January 16 Dealer buysDealer sellsDealer repurchases $450 million$400 million$400 million and of bondsof bonds as pays overnight repointerest Financing Needs of a Bond Dealer
5-4 US money market Bankers Acceptances US bankUS retailer Pays in future Bankers acceptance $ $ $Goods Foreign producer Foreign bank
5-5 Bank Borrowers Individuals and businesses Large CDs 7.5% Loans $ $ $ Deposit 6.9% Money market mutual funds Money Market Funds Fee = 0.10% Commercial paper 7% 5% Deposit $ $
5-6 Quoting rates on a discount basis Let the number of days until maturity be t. The price is P. The face value is par. The discount rate is d.
5-7 Money Market Cash Flows Points in time 0t days -P+par