27.Which of the following statements are true? Statement I. Money markets are used to facilitate the transfer of short-term funds from individuals, corporations, or governments with excess funds to...

27.Which of the following statements are true?


Statement I. Money markets are used to facilitate the transfer of short-term funds from individuals, corporations, or governments with excess funds to those with deficient funds. Even investors who focus on long-term securities tend to hold some money market securities because this enables them to maintain liquidity.


 Statement II. Financial institutions manage their liquidity by participating in money markets. They may issue money market securities when they experience cash shortages and need to boost liquidity. They can also sell holdings of money market securities to obtain cash.


Statement III. The value of a money market security represents the future value of the present cash flows generated by that security. Since money market securities represent debt, their expected cash flows are typically known.


Statement IV. The pricing of money market securities changes in response to a shift in the required rate of return by investors. The required rate of return changes in response to interest rate movements or to a shift in the security’s credit risk.