SIE (Training Consultants v3.5, 2025): Ch. 2 Debt Securities, Sec. 9 – Other Debt Instruments

Money Market Instruments

High-quality, short-term debt instruments that mature in 12 months or less.

Treasury Bills (T-Bills)

Most liquid money market instrument; direct short-term debt of the U.S. government; sold at a discount and redeemed at par.

Negotiable Certificates of Deposit (CDs)

Time deposits issued and guaranteed by banks; minimum $100,000; generally mature ≤1 year; trade “plus interest”; may incur penalties if cashed early.

Eurodollar Certificates of Deposit

Short-term CDs issued by banks outside the U.S.; interest and principal paid in U.S. dollars.

Commercial Paper

Unsecured promissory note issued by corporations at a discount; used for financing daily operations; maximum maturity 270 days; not FDIC insured.

Banker’s Acceptance (BA)

Instrument used to finance foreign trade; functions like a letter of credit; least liquid of money market instruments.

Exchange Risk

Risk associated with foreign or sovereign debt; not applicable to U.S. or domestic debt instruments.

What are money market instruments?

High-quality, short-term debt instruments that mature in 12 months or less.

Which money market instrument is the most liquid?

Treasury bills (T-Bills).

What are Negotiable CDs?

Bank-issued time deposits with $100,000 minimum, fixed maturity ≤1 year, trade “plus interest,” penalties for early withdrawal.

What is a Eurodollar CD?

A CD issued by a bank outside the U.S., paid in U.S. dollars.

What is Commercial Paper?

An unsecured promissory note issued at a discount by corporations to finance daily operations; max 270-day maturity; not FDIC insured.

What is a Banker’s Acceptance?

A short-term debt instrument used to finance foreign trade, similar to a letter of credit; least liquid of money market instruments.

What is exchange risk?

Risk associated with foreign or sovereign debt issues; not relevant for U.S. or domestic debt.