Question

Money Markets:

- What is LIBOR?

- What is a "basis point"?

- Why is the "TED Spread" significant?

- What is "commercial paper"?

Bonds:

- What is the difference between a Treasury "Bill", Treasury "Note", and a Treasury "Bond"?

- What is the current yield on a 10 Year Treasury Note? Has the yield been trending in a certain direction over the past year?

- What is the "Treasury Yield Curve"? What can we infer from it?

Mortgage Markets:

- How are mortgage rates impacted by Treasury yields?

- What are Mortgage-Backed Securities?

- How did Mortgage-Backed Securities contribute to the financial crisis over the past decade?

Solution Preview

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1. LIBOR is the London Interbank Offered Rate. This is the average rate which is expected to be paid by leading banks in London when they borrow funds from other banks. This is used as the benchmark rate in several floating rate transactions also since these rates are reset on a periodic basis.
2. Basis point refers to one...

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