ACCA Applied Skills · Financial Management · The nature and role of money markets
Which of the following is a function of the money markets for a government?
Governments use the money markets to fund short-term cash deficits by issuing Treasury bills, which bridge gaps between spending and tax receipts. Governments do not issue permanent equity, and the money markets do not determine dividend policy or value private company shares.
- ARaising permanent equity capital
- BFunding short-term cash deficits by issuing Treasury billsCorrect
- CDetermining corporate dividend policy
- DValuing shares of private companies
Explanation
Governments issue Treasury bills, short-term discount securities, to cover temporary gaps between spending and tax receipts. Governments do not raise equity, and money markets do not set dividend policy or value private shares.
Did you get it right without looking?
One question tells you little. A timed set on The nature and role of money markets shows your real accuracy, how long you take and where you lose marks.
More The nature and role of money markets questions
- Which of the following best describes the Eurocurrency market?
- A company issues 90-day commercial paper with a face value of $1,000,000 at a price of $985,000. What is the annualised simple yield, using …
- Which of the following best describes the primary function of the money markets?
- A company buys a 90-day treasury bill with a face value of $500,000 for $492,500. Assuming a 365-day year, what is the annualised simple yie…
- Which of the following would, other things being equal, be expected to cause the yield required on a corporate bond to be higher than that o…
- A company expects a temporary cash surplus of $2 million for three months and wants a marketable, low-risk, short-term investment that can b…