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CA Foundation Money Market — practice questions

Explore 52 free Money Market questions in CA Foundation Business Economics. Open each question or exercise to read its content, reference answers and available explanation.

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Money Market questions and exercises with answers

Showing questions 1–30 of 52.

The money market deals in loans for a period of what length?Read the answer and worked solution →How is trading in the money market typically conducted?Read the answer and worked solution →What concept lies at the heart of the money market?Read the answer and worked solution →Through which instruments is commercial finance made available to traders?Read the answer and worked solution →Which institutions help finance foreign trade in the money market?Read the answer and worked solution →Industries use the money market mainly to secure short-term loans for what need?Read the answer and worked solution →Commercial banks invest excess reserves in which kind of assets in the money market?Read the answer and worked solution →Investing in short bills lets banks earn profits without losing what?Read the answer and worked solution →What do short-term money market rates indicate to a central bank?Read the answer and worked solution →Which of these is a typical holding of money market funds?Read the answer and worked solution →A market made of highly liquid, short-term assets can be described as what?Read the answer and worked solution →Which type of money relies on intrinsically valuable commodities as a medium of exchange?Read the answer and worked solution →Which type of money gets its value from a government order?Read the answer and worked solution →Cheques and banknotes are examples of which kind of money?Read the answer and worked solution →Money market participants borrow and lend for periods of up to how long?Read the answer and worked solution →What is a repurchase agreement, or repo?Read the answer and worked solution →In a repo, at what price does the seller buy the security back?Read the answer and worked solution →Economically, a repo is most similar to which transaction?Read the answer and worked solution →If the borrower in a repo defaults, what does the lender get?Read the answer and worked solution →The excess of collateral value over the cash lent in a repo is called what?Read the answer and worked solution →A reverse repo is the same agreement seen from whose viewpoint?Read the answer and worked solution →What describes an open repo?Read the answer and worked solution →What is a term repo?Read the answer and worked solution →In a tri-party repo, what does the third party typically provide?Read the answer and worked solution →Why is a repo considered safer for the cash investor?Read the answer and worked solution →Which large investors are major buyers of repurchase agreements?Read the answer and worked solution →To curb inflation, the RBI may do what to the repo rate?Read the answer and worked solution →The liquidity adjustment facility (LAF) lets banks borrow through what?Read the answer and worked solution →What problem does the LAF help banks adjust?Read the answer and worked solution →What does a repo operation under LAF do to system liquidity?Read the answer and worked solution →

Worked practice questions

The money market deals in loans for a period of what length?

  1. Exactly three years
  2. Five years or more
  3. Ten to twenty years
  4. One year or less
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Correct answer: D. One year or less

Money market funds are short-term, with original maturities of a year or less.

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How is trading in the money market typically conducted?

  1. On a retail stock exchange floor
  2. Through public auctions of land
  3. Over the counter and wholesale
  4. By door-to-door agents only
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Correct answer: C. Over the counter and wholesale

Money market deals are large wholesale trades negotiated over the counter rather than on an exchange.

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What concept lies at the heart of the money market?

  1. Foreign direct investment
  2. Equity underwriting
  3. Long-term project finance
  4. Interbank lending
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Correct answer: D. Interbank lending

Banks lending to and borrowing from each other short term is the core activity of the money market.

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