securities when issued

securities when issued and actively trade them in secondary markets. Because of this activity, the government securities market is very liquid.
7. Conunercial paper of a company that does not qualify for a top credit rating can be supported by a standby letter of credit from a commercial bank, to be drawn on only in the event of default by the commercial paper issuer. If the commercial bank has a high credit rating, the commercial paper will then receive a comparable rating.
8. a. A banker’s acceptance is a time draft (postdated instrument) payable to a seller of goods with payment guaranteed by a bank. Banker’s acceptances for U.S. imports and exports involve a U.S. firm as one of the principal parties. A third-country acceptance involves a buyer and seller of goods that are not U.S. entities, but a bank that is.
b. A majority of third-country acceptances are refinance bills. A refinance bill is created when a draft is drawn on a U.S. bank by a non— U.S. bank. Prior to this point, the non-U.S. bank has acted as the “accepting” bank in an international trade transaction between two non-U.S. entities (the original buyer and seller).
9. The Federal Reserves holds roughly 75 percent of its assets in the form of U.S. government securities. It is the fiscal agent for the Treasury Department, accepting bids and distributing government securities in auctions. The most important function of the Federal Reserve in the money markets, however, is the purchase and sale of government securities in the execution of monetary policy.
10. In a tender system, a predetermined quantity of securities is offered for sale and sold, or “tendered” to the highest bidders. In a tap system, government securities are sold only when the public requests them.