Session 17 — Money Markets & Repo • True/False Quiz

1) A money market is for very short-term borrowing and lending, roughly from overnight up to about one year.

2) Money market mutual funds are mainly designed to hold long-term stocks and 30-year bonds for growth.

3) A money market mutual fund is a bank deposit that is automatically FDIC-insured just like a checking account.

4) Many money market mutual funds try to keep their share price close to $1.00 while offering daily liquidity and modest yield.

5) A bank money market deposit account (MMDA) is a deposit account at a bank, not a mutual fund.

6) A repurchase agreement (“repo”) is an unsecured loan with no collateral posted by the borrower.

7) Repo is an example of secured borrowing, because the cash lender holds collateral such as Treasuries.

8) When a bond is “special” in repo, its repo rate is typically higher than the general collateral (GC) rate because everyone wants to borrow it.

9) Retail investors can log into the Federal Reserve directly and place their cash overnight in the Fed’s ON RRP facility.

10) The Fed’s overnight reverse repo (ON RRP) facility mainly acts as a ceiling on overnight market rates.

11) SOFR (Secured Overnight Financing Rate) is based on U.S. Treasury repo transactions and has replaced USD LIBOR in most new U.S. dollar contracts.

12) Today, LIBOR is still the primary benchmark used for new U.S. dollar loans and derivatives.

13) Money market mutual funds are mainly used as a place to park cash and short-term balances, not as a long-term growth investment like a stock fund.

14) Money market mutual funds can never change yield or NAV; they are guaranteed by the government to stay at exactly $1.00 with a fixed rate.

15) If the Fed cuts short-term policy rates sharply, yields on new money market instruments are guaranteed to stay high for years and will not adjust down.