Question

1. Compare and contrast three different money market securities in terms of issuer, return,
risk and tradability /liquidity.

2. Explain the role of non-depository financial institutions within the financial sector?
Discuss the core functions of any three of these institutions.

3. In class we learnt about defined-benefit pension plans and a defined-contribution
pension plans. How will you explain these to your sibling who just got a job after his
University education? Which of them will you recommend to him and why?

4. Compare and contrast index fund and active fund. Provide relevant examples of these
and explain what their objective is.

5. Jimmy Enterprises Inc. has twenty years remaining on Ghc 1,000 par value
semiannual coupon bonds paying a coupon of Ghc40. If the yield to maturity on these
bonds is 6% per year, what is the current price?

Answer 1

1. Three different types of money market instruments I will be discussing would be-

Treasury bills, certificate of deposits, commercial papers.

Differences between all three are as follows-

A. Issuer-treasury bills are often issued by the central bank of a country and certificate of deposits and commercial papers are generally issued by corporates and companies

B.Return- return of treasury bills would be lowest because there is risk free criteria added to treasury bills whereas return on commercial papers and certificates of deposits should be higher then the treasury bills.

C.Risk- Risk associated with treasury bills would be lowest because these are risk free securities where as commercial papers and certificates of deposit should be having higher risk than the treasury bills

D. Tradebility and liquidity-commercial papers and certificate of deposits are more liquid instruments where as treasury bills are also liquid instruments but not as liquid as commercial paper and certificate of deposits because they will have the lowest time frame associated with them. It can be said that the money market instruments are all liquid