【正文】 turity. longer maturities would require registration with the Securities and Exchange Commission and so are almost never issued. Most often, mercial paper is issued with maturities of less than 1 or 2 months. Usually, it is issued in multiples of $100,000. Therefore, small investors can invest in mercial paper only indirectly, via money market mutual funds.p. 31s condition presumably can be monitored and predicted over a term as short as 1 month.assetbacked mercial paper AcceptancesAs acceptanceA money market asset consisting of an order to a bank by a customer to pay a sum of money at a future date.s customer to pay a sum of money at a future date, typically within 6 months. At this stage, it is similar to a postdated check. When the bank endorses the order for payment as “accepted,” it assumes responsibility for ultimate payment to the holder of the acceptance. At this point, the acceptance may be traded in secondary markets like any other claim on the bank. Bankers39。s credit standing for their own. They are used widely in foreign trade where the creditworthiness of one trader is unknown to the trading partner. Acceptances sell at a discount from the face value of the payment order, just as Tbills sell at a discount from par value.EurodollarsEurodollarsDollardenominated deposits at foreign banks or foreign branches of American banks.Most Eurodollar deposits are for large sums, and most are time deposits of less than 6 months39。repurchase agreements,Shortterm, often overnight, sales of government securities with an agreement to repurchase the securities at a slightly higher price. A reverse repo is a purchase with an agreement to resell at a specified price on a future date.Ais essentially an identical transaction, except that the term of the implicit loan can be 30 days or more. Repos are considered very safe in terms of credit risk because the loans are backed by the government securities. Ais the mirror image of a repo. Here, the dealer finds an investor holding government securities and buys them, agreeing to sell them back at a specified higher price on a future date.p. 32Federal FundsJust as most of us maintain deposits at banks, banks maintain deposits of their own at a Federal Reserve bank. Each member bank of the Federal Reserve System, or “the Fed,” is required to maintain a minimum balance in a reserve account with the Fed. The required balance depends on the total deposits of the bank39。s reserve account are calleds reserve account.fed funds.Although the fed funds market arose primarily as a way for banks to transfer balances to meet reserve requirements, today the market has evolved to the point that many large banks use federal funds in a straightforward way as one ponent of their total sources of funding. Therefore, the fed funds rate is simply the rate of interest on very shortterm loans among financial institutions. While most investors cannot participate in this market, the fed funds rate mands great interest as a key barometer of monetary policy.Brokers39。London Interbank Offered Rate (LIBOR)Rate that most creditworthy banks charge one another for large loans of Eurodollars in the London market.LIBOR interest rates may be tied to currencies other than the . dollar. For example, LIBOR rates are widely quoted for transactions denominated in British pounds, yen, euros, and so on. There is also a similar rate called EURIBOR (European Interbank Offered Rate) at which banks in the euro zone are willing to lend euros among themselves.Yields on Money Market InstrumentsAlthough most money market securities are of low risk, they are not riskfree. The securities of the money market promise yields greater than those on defaultfree Tbills, at least in part because of greater relative riskiness. In addition, many investors require more liquidity。Figure Figure Chapter 1, you39。Until 2008, only one fund had “broken the buck,” that is, suffered losses large enough to force value per share below $1. But when Lehman Brothers filed for bankruptcy protection on September 15, 2008, several funds that had invested heavily in its mercial paper suffered large losses. The next day, the Reserve Primary Fund, the oldest money market fund, broke the buck when its value per share fell to only $.97.s Prime Money Market Fund announced that it was liquidating due to heavy redemptions. Fearing further outflows, the . Treasury announced that it would make federal insurance available to money market funds willing to pay an insurance fee. This program would thus be similar to FDIC bank insurance. With the federal insurance in place, the outflows were quelled.s money market funds had already spilled over into “Main Street.” Fearing further investor redemptions, money market funds had bee afraid to mit funds even over short periods, and their demand for mercial paper had effectively dried up. Firms that had been able to borrow at 2% interest rates in previous weeks now had to pay up to 8%, and the mercial paper market was on the edge of freezing up altogether. Firms throughout the economy had e to depend on those markets as a major source of shortterm finance to fund expenditures ranging from salaries to inventories. Further break down in the money markets would have had an immediate crippling effect on the broad economy. Within days, the federal government put forth its first plan to spend $700 billion to stabilize the credit markets.Figure Money market funds are mutual funds that invest in money market instruments and have bee major sources of funding to that sector. The nearby box discusses the fallout of the credit crisis of 2008 on those funds.1Both of these “errors” were dictated by putational simplicity in preputer days. It is easier to pute percentage discounts from a round number such as par value rather than purchase price. It is also easier to annualize using a 360day year, because 360 is an even mu