00:01
This problem covers the concept of the financial market instrument.
00:05
The problem asks us to describe who issues the debt for the following money market instrument.
00:10
And we'll start with part a, which the market instrument would be the u .s.
00:17
Treasury bill.
00:18
I'll write u .s .t bill for short.
00:20
And to understand who issues the debt, we have to first understand what the instrument is.
00:24
For the u .s.
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Treasury bill, it is a short -term debt instrument that the u .s.
00:30
Government issues in one, three, or six -month maturities to finance the federal government.
00:35
In other words, the u .s.
00:36
Government here, i'll write the government for short, would be the debt issuer.
00:44
For part b, our financial instrument would be the certificates of deposit, and i'll write cd for short.
00:53
And cd is actually a debt instrument that's sold by the bank to the depositors.
00:59
That pays annual interest of a certain amount, and at maturity, they will pay the original amount back, which is the purchase price.
01:11
So in other words, cd is actually a debt that is issued by the bank.
01:18
So i would say the bank would be the issuer.
01:23
Part c, the instrument would be commercial papers.
01:32
And again, to understand who is the debt issuer, we have to first understand what commercial papers is.
01:38
So a commercial paper actually is also another short -term debt instrument issued by normally large banks or large companies.
01:47
Companies like microsoft, apples, or general motors, they are also examples of the commercial paper issuers.
01:56
So i would say the issuers are normally banks and companies.
02:09
And these are normally not large banks and companies that are financially healthy enough to do this.
02:24
And they're normally large ones...