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  3. The market for large business certificates of deposit or negotiable certificates of deposit (CDs) in denominations of $100,000 o

The market for large business certificates of deposit or negotiable certificates of deposit (CDs) in denominations of $100,000 o

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问题     The market for large business certificates of deposit or negotiable certificates of deposit (CDs) in denominations of $100,000 or more has been active since 1961. It is a money market specializing in the sale of Marketable, interest-yielding deposit certificates with specified maturity dates, issued by four types of financial intermediaries. Domestic CDs are issued by US banks. Dollar-de- nominated CDs issued by banks outside the United States are called Euro CDs. The CDs issued by US branches of foreign banks are called Yankee CDs. Thrift CDs are the name used to designates CDs issued by domestic thrifts.
    The holder of a CD who wishes to exchange it for money before its maturity date will ask a money market participant (often a commercial bank) to arrange a sale through a specialized dealer. There is an active secondary market in CDs centered in New York.  There are approximately 25 dealers in CDs.
    The CD is an instrument that allows the depository intermediaries to raise funds at competitive market rates. It is called one of their managed liabilities. Since they loan out funds at their lending rates, they would normally keep their advertised prime rate above the CD rate. As noted previously, the prime rate formula that had been used by Citibank set the prime one-and-a-half percentage points above the previous three-week average of 90-day (3-month) CDs sold in the secondary market.
    The yield on 3-month CDs is usually higher than 3-month Treasury bills. Treasury bills have a lower default risk and exempt from state and local tax. This may explain the extent of the spread.
The reason why the market for large CDs has been active since 1961 may be that the yield is usually higher than Treasury bills.
选项 A、Right
B、Wrong
C、Doesn’t say
答案A
解析 文章最后一段提到The yield on 3-month CDs is usually higher than 3-month Treasury bills…This may explain the extent of the spread。
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