Tutorial 5: Money market/ Marketable securities

1. Describe the characteristics of money market.

2. Explain the yield instrument and discount instrument in money market.

3. Explain FOUR (4) types of money market instruments.

4. Malaysian Treasury Bills (TBs) of face value RM10 million with 150 days remaining to
maturity is sold at a rate of 4.20%. Assumes that one year has 365 days, Determine the value of
the proceeds.

5. ABC Holdings drew a BA for RM1.5 million for 120 days and accepted by XYZ Bank at a
discount rate of 5.0% p.a. The customer enjoys an acceptance commission rate of 0.75% p.a.

(a) How much does ABC Holdings have to pay the bank as acceptance commission?

(b) What are the discounted proceeds?

(c) If XYZ Banks holds the BA for 25 days and then sells the BA at a rate of 4.5% p.a., what are
the discounted proceeds and the effective rate of return on the BA?

*Assumes that one year has 365 days.

6. Steven has bought a treasury bill that has a face value of RM3 million with 9 months maturity
sold at 4.3%. Assumes that one month equals to 30 days and calculate the value of the proceeds.

7. On 1 March 2016, ABC Funds has bought a banker acceptance (BA) which carries a face
value of RM15 million issued at 10% for 180 days. On 1 July 2016, ABC Funds decided to sell it
to a third party at the prevailing rate of 10%. Assumes that one month is equal to 30 days,
calculate the value of the proceeds on 1 July 2016 and determine the holding period return in
percentage for the BA.
8. A deposit of RM1 million is made on 1 March 2016 for 90 days, and interest paid on the
amount is 15% (referred to as a 15% 90-day NCD), determine the following:

a) Maturity value for the deposit.

b) Proceeds of the deposit if the seller decided to sell the deposit to another buyer on 31 March
2016 at a yield of 14%.

*Assume that one year has 365 days.

9. Hedgeman has a negotiable deposit of RM2,500,000 is made on 1 April 2016 for 120 days,
and interest paid on the amount is 8%, determine the following:

a) Maturity value for the deposit

b) Proceeds of the deposit if Hedgeman decided to sell the deposit to another buyer on 15 June
2016 at a rate of 7%.

c) Holding period return for Hedgeman who decided to sell the deposit to another buyer on 15
June 2016.

*Assumes that one month equals to 30 days.