| Course | FNCE 4102 Financial Institutions and Markets |
|---|---|
| Week | Week 4 |
| Paper type | Money market note |
| Length | About 760 words, 5 pages |
| Format | APA 7 student paper |
| School | Walden University |
| Program | BS in Business Administration |
| Updated | October 2026 |
Free sample paper for FNCE 4102 Week 4
Where a Corporate Treasurer Parks $50 Million Overnight: Repurchase Agreements, Commercial Paper, Treasury Bills and Money Market Fund Shares Compared on Term, Collateral, Rate and Counterparty in Late July 2023
Student Name
Walden University
FNCE 4102: Financial Institutions and Markets
Instructor Name
Month Day, Year
Where a Corporate Treasurer Parks $50 Million Overnight: Repurchase Agreements, Commercial Paper, Treasury Bills and Money Market Fund Shares Compared on Term, Collateral, Rate and Counterparty in Late July 2023
The Treasurer's Constraints
The treasurer of a composite manufacturing company holds $50 million in cash that must cover payroll and supplier payments over the coming weeks. The money has two requirements: it must be safe, because losing even a small part would be unacceptable, and it must be available, some of it tomorrow morning and the rest within a month. Earning a return comes third, a distant third. Those constraints point the treasurer to the money market, where instruments mature in a year or less, usually much less (Mishkin & Eakins, 2018). The rates below are approximate values for late July 2023, just after the Fed's July 26 quarter-point increase put its policy range at 5.25 to 5.50 percent.
Four Instruments in the Same Format
Table 1
Four Money Market Instruments, Late July 2023
| Instrument | Typical term | Collateral | Approximate rate | Party on the other side | |
|---|---|---|---|---|
| Repurchase agreement | Overnight to a few days | Treasury securities held by the lender | About 5.3% (secured overnight financing rate) | A dealer bank financing its securities inventory | |
| Commercial paper | 1 to 270 days, often 30 | None; unsecured | About 5.3% for 30-day high-grade nonfinancial paper | A large corporation funding receivables or payroll | |
| Treasury bill | 4 weeks to 1 year | None needed; backed by the U.S. government | About 5.4% for 3 months | The U.S. Treasury | |
| Government money market fund shares | Withdrawable daily | Fund holds Treasuries and Treasury repos | About 5.1% to 5.2% seven-day yield | A fund manager pooling many investors | |
Rates are approximate, rounded from published series for late July 2023: the Federal Reserve Bank of New York for the secured overnight financing rate, the Federal Reserve Board for commercial paper and the Treasury for bills.
How the Instruments Connect
The four are linked. A government money market fund collects cash from many investors, including corporate treasurers, and invests much of it in Treasury bills and in repurchase agreements with dealer banks. The dealers use the repo cash to finance their holdings of Treasury securities, which they buy at Treasury auctions and sell to investors. Commercial paper sits slightly apart, because it is unsecured corporate borrowing; prime money market funds, rather than government funds, are its main buyers. Cash moves around this circuit daily, and the secured overnight financing rate measures the cost of the repo leg (Federal Reserve Bank of New York, n.d.).
Who Earns What
Each party earns a spread. The dealer bank borrows in the repo market at about 5.3 percent and holds Treasury securities yielding slightly more, keeping the difference. The money market fund earns the rates on its bills and repos and passes them to shareholders after a management fee, which is why its yield sits slightly below the instruments it holds. A commercial paper issuer pays a small premium over Treasuries because its paper is unsecured; in late July 2023 that premium for the strongest issuers was small, a sign of calm conditions.
What the Treasurer Should Do
The treasurer should split the money by when it is needed. Cash needed tomorrow belongs in a government money market fund, which offers same-day access, holds only government-backed assets and pays close to market rates. Cash needed within one to three months can go into Treasury bills chosen to mature just before the payments are due, earning a little more with no credit risk. Commercial paper adds only a small amount of yield and carries the risk of an issuer's default, so it belongs in the portfolio only if the treasurer has the staff to assess issuers. Repurchase agreements are mainly for institutions with custody arrangements and legal agreements already in place with dealer banks; a company the treasurer's size would usually reach them through a fund rather than directly.
A Note on Stress
The money market is safe in calm periods but has failed under stress. In September 2008 a prime money market fund, the Reserve Primary Fund, "broke the buck" after losses on Lehman Brothers commercial paper, triggering withdrawals across prime funds (Kacperczyk & Schnabl, 2010). Prime funds faced heavy withdrawals again in March 2020, and the Federal Reserve set up an emergency facility to support them. In July 2023 the Securities and Exchange Commission adopted further reforms, including removing the ability of funds to suspend redemptions and requiring liquidity fees for some institutional prime funds when outflows are large. That history is why the recommendation favors government funds for cash needed tomorrow.
References
Federal Reserve Bank of New York. (n.d.). Secured overnight financing rate data. https://www.newyorkfed.org/markets/reference-rates/sofr
Kacperczyk, M., & Schnabl, P. (2010). When safe proved risky: Commercial paper during the financial crisis of 2007-2009. Journal of Economic Perspectives, 24(1), 29-50. https://doi.org/10.1257/jep.24.1.29
Mishkin, F. S., & Eakins, S. G. (2018). Financial markets and institutions (9th ed.). Pearson.
The Walden FNCE 4102 Week 4 instructions
In Week 4 you explain the money market from the point of view of someone who holds short-term cash. Begin with that person's constraints, safety and availability, before describing any instrument. Then describe four or more instruments in the same format: typical term, collateral or its absence, the rate on a named date and the party on the other side. Show how the instruments connect, as a diagram or table of flows. Explain who earns what along the way. Recommend how the cash holder should use the instruments, and note how the market behaves under stress. Cite sources for every rate.
How the FNCE 4102 Week 4 example is put together
The note opens with the treasurer's two constraints and dates the rates to late July 2023. A four-row table compares repo, commercial paper, Treasury bills and government fund shares, with a source line for the rates. The connections section traces cash from funds to bills and dealer repos, with commercial paper bought mainly by prime funds, citing the New York Fed for the overnight rate. The earnings section explains dealer, fund and issuer spreads. The recommendation puts tomorrow's cash in a government fund and one-to-three-month needs in bills, citing Mishkin and Eakins. The stress section cites Kacperczyk and Schnabl on 2008 and describes the 2023 reforms.
FNCE 4102 Week 4 rubric: what earns full marks
Money market notes are graded on accuracy, consistent comparison and practical judgment. Each instrument should be described in the same format so the reader can compare them directly, with rates dated and sourced. Strong notes show that the instruments form a connected system rather than a list and explain who earns a spread at each point. The recommendation should follow from the cash holder's constraints and treat safety before yield. A section on stress shows awareness that these markets have failed before and why reforms followed. Undated rates, inconsistent descriptions or recommendations that chase yield over safety lose credit. The best notes also explain why rates on the four instruments sit so close together in calm conditions and why the gaps widen in stress, since that spread is a signal of how much risk the market sees in each counterparty.
FNCE 4102 Week 4 help from the desk
Write down the cash holder's needs first: how much, how safe, how soon. Then gather the current or a recent dated rate for each instrument from an official source. Describe each in the same four parts so differences stand out. Sketch how cash flows among them, from funds to dealers to the Treasury. Ask where the cash holder is exposed to a borrower's default. Finally, look up one stress episode and what changed after it. Common weaknesses are undated rates and recommendations based only on the highest yield. Share the cash holder's situation, and we can help match instruments to it.
Get a FNCE 4102 Week 4 example written to your instructions
Send over the Week 4 prompt and the rubric your classroom posted, plus any instrument your instructor singled out, and the note covers those rather than this set. The first custom sample is free and comes back inside 24-48 hours. Every rate quoted carries the date and the series it was taken from.
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FNCE 4102 Week 4 questions, answered
Where can I find a free FNCE 4102 Week 4 sample paper?
The money market note, its comparison table and the recommendation are available here at no cost.
Which instruments does the FNCE 4102 Week 4 note compare?
Repurchase agreements, commercial paper, Treasury bills and government money market fund shares.
What rates does it use?
Approximate late-July 2023 rates, about 5.1 to 5.4 percent, just after the Federal Reserve's increase to 5.25 to 5.50 percent.
What does the note recommend?
A government money market fund for cash needed tomorrow and Treasury bills for cash needed within one to three months.
Why avoid prime funds for overnight cash?
Prime funds suffered runs in 2008 and 2020; government funds hold only government-backed assets.