MONEY MARKET INSTRUMENTSHETAC DEGREE FINANCIAL MARKETSInstruments quoted at a ds!ount a" Treasur# $%%s &" Commer!a% 'a'er !"Commer!a% &%%s d"$an(ers a!!e'tan!esCOMMERCIAL )A)ER *C)+Issued at a ds!ount Issued a ,rm to ,nan!e- a" In.entores &" S/ort term %a&%tes !"A!!ounts re!e.a&%esCOMMERCIAL )A)ER *C)+Issued %ar0e !or'oratons 1t/ stron0 !redt ratn0sIssued to ot/er %ar0e ,rms e0 'enson 2unds3 &an(s et!Is used as an unse!ured s/ort term %oanCOMMERCIAL )A)ER *C)+Has maturt# o2 u' to 456 da#sC) s a qu!( and eas%# arran0ed a%ternat.e to a &an( %oanIs ssued at a ds!ount to t/e 'ar .a%ue COMMERCIAL )A)EROn maturt# t/e n.estor re!e.es t/e 'ar .a%ue T/e #e%ds are !a%!u%ated n e7a!t%# t/e same 1a# as #e%ds on a treasur# &%%Not &a!(ed !o%%atera%TY)ES OF COMMERCIAL )A)ERa" Ster%n0 !ommer!a% 'a'er&" US !ommer!a% 'a'er !" Euro !ommer!a% 'a'er $ILLS OF E8CHANGE Trade &%%sor Commer!a% &%%sAre sm%ar to treasur# &%%s Issued 'r.ate !om'anes a0anst t/e sa%e o2 0oodsUsed to ,nan!e trade n t/e s/ort term$ILLSA 'romse one ,rm to 'a# anot/er a ,7ed amount at some s'e!,ed tme n t/e near 2utureT/e 'romse s 0.en n res'e!t o2 some 0oods or ser.!e 1/!/ /as &een 'ur!/ased"$ILLST/e 'ar .a%ue or maturt# .a%ue n!%udes a sum o.er and a&o.e t/e .a%ue o2 t/e 0oods3 1/!/ s t/e nterest 'a#a&%e to t/e se%%er"On!e ssued t/e &%% !an &e traded$ANK ACCE)TANCEST/e# are used to 2a!%tate trade et/er on t/e domest! mar(et or nternatona% mar(et"Used m'orters man%# as a %o1 !ost a%ternat.e to %oans$ANKERS ACCE)TANCESAn nstrument 1/ere a &an( 0uarantees on &e/a%2 o2 ts !%ent t/e re'a#ment o2 a %oan to t/e /o%der o2 t/e nstrument"T/e m'orter as(s t/e &an( to !reate an a!!e'tan!e 1/!/ t/e m'orter t/en mmedate%# se%%s3 at a ds!ount3 to an n.estor n order to 0enerate 2unds to 'a# 2or t/e 0oods 'ur!/ased"$ANKERS ACCE)TANCESAt maturt# t/e a!!e'tn0 &an( 'a#s t/e n.estor and T/e m'orter must re'a# t/e amount o2 t/e a!!e'tan!e to t/e &an(T/e n.estor earns t/e amount o2 t/e ds!ount"$ANKERS9 ACCE)TANCESCan &e used e7'orters n mu!/ t/e same 1a# as an m'orter- a" To &rd0e t/e tme &et1een s/'ment o2 0oods and re!e't o2 'a#ment &" Can &e used to se%% re!e.a&%es to a &an(SECURITIES :UOTED ON A YIELD $ASISMone# mar(et de'ostsNe0ota&%e !ert,!ate o2 de'ostsRe'ur!/ase a0reements *RE)OS+Inter &an( mar(et:UOTED ON A YIELD $ASIST/ese are nstruments ssued *'r!ed+ at 'arT/e# are attra!t nterest on t/e nta% n.estment"T/e# are used 2or n.estment 'ur'oses 2or a s/ort 'erod o2 tme %ess t/an a #ear"MONEY MARKET DE)OSIT *MMDS+T/ese are ,7ed nterest n.estmentsHa.e ,7ed term de'ostsT/e# are not ne0ota&%e !annot &e %qudated &e2ore maturt#De'osts are/e%d 1t/ &an(s and ds!ount /ousesMONEY MARKET DE)OSITInterest and !a'ta% s 'ad n one %um' sum on t/e maturt# da#"Interest re%ated to EURI$OR;EURI$IDSm'%e nterest met/od s used to !a%!u%ate t/e nterest a!!rued"MMDS < INTEREST COM)UTATIONE7am'%e Ca%!u%ate t/e maturt# .a%ue o2 a => da#3 ?>6 m%%on mone# mar(et de'ost n.ested at a rate o2 =">6@"Assume a =A6 da# #ear"MMDS INTEREST COM)UTATIONI B M 7 r 7 *N;=A6+F BM C AI D/ere-M B Fa!e or 'ar .a%ue o2 se!urt#rB nterest rateN B num&er o2 da#s &et1een de'ost and maturt#MMDS INTEREST COM)UTATIONInterestB M 7 r 7 *N;=A6+B ?>6m 7 6"6=>6 7 =>;=A6B ?4A3AEFMMDS MATURITY GALUE F B M C IMaturt# .a%ue *F+ B )ar .a%ue C nterest B ?>6m C ?4A3AEFB ?>6364A3AEFMMDS CLASS E8ERCISEHo1 mu!/ nterest 1%% a 4 mont/ *A6 da#s+ mone# mar(et de'ost earn 2 ?H m%%on s n.ested at a 4 mont/ rate o2 =@IMMDS < INTERESTInterestB M 7 r 7 *N;=A6+B ?Hm 7 6"6=66 7 A6;=A6B ?4H3666CERTIFICATE OF DE)OSIT *CD+Is a !ert,!ate 1/!/ !ert,es t/at a de'ost o2 a !ertan amount /as &een made at a &an( andIt s'e!,es t/e nterest to &e 'adCan &e used as !o%%atera% 2or a %oanTY)ES OF CDSNon ne0ota&%e CD /e%d on to maturt# and !annot &e so%d &e2ore ts maturt# date"Ne0ota&%e CD !an &e reso%d &e2ore t/e maturt# dateNEGOTIA$LE CDCan &e so%d t/e nta% de'ostor on t/e o'en mar(et &e2ore maturt#"It /as a ,7ed rate o2 nterest re%ated to Eur&d 2or ? de'osts"NEGOTIA$LE CDT/e nterest rate s !a%%ed t/eJ!ou'on rateKDe'osts t/emse%.es !annot &e traded &ut t/e re!e'ts or !ert,!ates are ne0ota&%e e !an &e traded n a se!ondar# mar(etInterest rates are s%0/t%# %o1er t/an MMDs &e!ause o2 t/e added &ene,t o2 %qudt#CDS KEY COM)UTATION AREASCurrent #e%d o2 t/e CDCurrent 'r!e o2 t/e CDNEGOTIA$LE CDS CURRENT YIELDE7am'%e >A ?> m%%on CD ssued at 'ar 1t/ a !ou'on o24"6H@/as E> da#s to maturt#"Ca%!u%ate t/e nta% #e%d on t/e CD"CURRENT YIELD < CD r B M;) *> C d *Nm;=AH+ > 7 =AH;NsmD/ere-r B !urrent #e%dM B 2a!e .a%ue o2 t/e CDNm B Num&er o2 da#s &et1een ssue and maturt#CURRENT YIELD < CDNsm B num&er o2 da#s &et1een sett%ement and maturt# ) B !urrent mar(et 'r!ed B !ou'on rateCURRENT YIELD < CDr B M;) *> C d *Nm;=A6+ > 7 =A6;Nsm B?>m;?>m *> C 6"64> *E>;=A6+ > *=A6;E>+B 4">6@CURRENT YIELD < CDE7am'%e 4DEF %mted /as a ?> m%%on CD ssued at 'ar 1t/ a !ou'on o2 4"6H@ and E> da#s to maturt#3 !urrent%# 'r!ed at ?>366>3666 and A> da#s remann0"Ca%!u%ate t/e !urrent #e%d o2 t/e CD"CURRENT YIELD < CD r B M;) *> C d *Nm;=AH+ > 7 =AH;NsmB?>m;?>"66>m *> C 6"64H *E>;=A6+ >*=A6;A>+B ="5=@CURRENT )RICE < CD) B M *> C d *Nm;=AH+; *> C r *Nsm+D/ere-) B !urrent 'r!e M B 2a!e .a%ue o2 t/e CDCURRENT )RICE < CDd B !ou'on rateNm B num&er o2 da#s &et1een ssue and maturt#Nsm B Num&er o2 da#s &et1een sett%ement and maturt#r B #e%d rateCURRENT )RICE < CDE7am'%e A '%! /as a ?>m CD at 'ar 1t/ !ou'on o2 L@ 1t/ E> da#s to maturt#3 !urrent%# #e%dn0 E@ 1t/ A> da#s remann0"Ca%!u%ate t/e !urrent 'r!e o2 t/e CD"CURRENT )RICE < CD) B M *> C d *Nm;=AH+; *> C r *Nsm+B ?>m *> C 6"6L *E>;=AH+ ; *> C 6"6E *A>;=AH+B ?>366F3LE5"H=RE)URCHASE AGREEMENT *RE)OS+Is an nstrument ssued on a #e%d &assIt n.o%.es t/e sa%e o2 se!urtes to0et/er *e0 treasur# &%%s+ 1t/"An a0reement 2or t/e se%%er to &u# &a!( t/e se!urtes at a %ater date"RE)OST/e 'ur!/ase 'r!e s/ou%d &e 0reater t/an t/e or0na% sa%e 'r!e"T/e dMeren!e re'resentn0 nterest3 s sometmes !a%%ed t/e repo rate"T/e 'art# t/at originally buys t/e se!urtes eMe!t.e%# a!ts as a lender.RE)OST/e original seller s eMe!t.e%#a!tn0 as a borrower usn0 se!urt# as !o%%atera% 2or a se!ured %oan3At a ,7ed rate o2 nterestIt s a 2orm o2s/ort term &orro1n0 RE)OSUsed to rase s/ort term !a'ta%Most re'os are o.ern0/t transa!tonsT/e dMeren!e &et1een sa%e and re'ur!/ase 'r!es 'ad 2or t/e se!urt# re'resents nterest on t/e %oan"RE)OS E8AM)LE A$C '%! arran0es a 'ur!/ase o2 se!urtes 2or ?H"E m%%on 1t/ an arran0ement to rese%% t/em n 56 da#s 2or ?A m%%on"Assume a =A6 da# #ear"Ca%!u%ate t/e re'o rate earned A$C '%!RE)OSYe%d B M );)"NsmB ?Am < ?H"Em;?H"Em 7 56;=A6B L"54@