CTP EXAM PRACTICE QUESTIONS
WITH DETAILED, VERIFIED
ANSWERS; A GRADE; 2026
A bank is evaluating the credit risk for a company seeking
to optimize costs and originate a high volume of outgoing
ACH payments. What is the BEST provision the bank
should establish to control its credit exposure?
A. An intraday credit limit for the company
B. A limit on the number of items processed per day
C. An overdraft facility for the company
D. A standby letter of credit for the company - correct
answer- A
A bank issues a letter of credit (L/C) and receives a
request for payment under the L/C. The buyer notifies the
issuing bank not to make payment because there is a
dispute over the quality of the merchandise. However, the
,documents received fully comply with the terms of the
L/C. Which of the following statements is true?
A. The buyer may immediately return the merchandise
and cancel the L/C.
B. The bank may delay payment until reimbursed by the
buyer.
C. The bank may delay payment, provided the seller is
notified of the dispute within three business days. D. The
bank must make payment and is entitled to immediate
reimbursement from the buyer. - correct answer-
A buyer receives an invoice from a supplier that offers
discount terms of 3/10, net 60. What is the effective cost
of discount?
A. 15.64% B. 16.13% C. 21.90% \
D. 22.58% - correct answer- D
,A cash manager has determined that the break-even
amount for justifying a wire transfer over an ACH for
concentration of funds is $145,000. Using a wire instead
of an ACH givesthe company use of the funds two days
earlier to make overnight investments. Based on a wire
transfer cost of $10.00 and an ACH transaction cost of
$0.70, what is the company's overnight investment
interest rate on a 365-day year basis?
A. 0.95% B. 1.17% C. 2.34% D. 2.57% - correct
answer- B
A company enters into a cash flow hedge to offset
fluctuations in the value of foreign currency transactions
occurring in two years. How should the company record
the gains and/or losses on the cash flow hedge in the
current year?
A. The hedged gains and losses are reported in
comprehensive income. B. The hedged gains and losses
are reported in current period income. C. The hedged
gains and losses are reported in current period income
, together with the offsetting gains and losses of the foreign
currency. D. The hedged gains and losses are reported in
comprehensive income together with the offsetting gains
and losses of the foreign currency. - correct
answer- A
A company has a line of credit and a bond trustee
agreement with a bank. To prevent a decline in the
company's bond rating from having a negative impact on
the company's line of credit, the bank should have which
of the following in place?
A. Code of conduct
B. Confidentiality agreement
C. Notional barrier
D. Risk profile - correct answer- C
A company has negotiated a credit facility with the
following terms:
WITH DETAILED, VERIFIED
ANSWERS; A GRADE; 2026
A bank is evaluating the credit risk for a company seeking
to optimize costs and originate a high volume of outgoing
ACH payments. What is the BEST provision the bank
should establish to control its credit exposure?
A. An intraday credit limit for the company
B. A limit on the number of items processed per day
C. An overdraft facility for the company
D. A standby letter of credit for the company - correct
answer- A
A bank issues a letter of credit (L/C) and receives a
request for payment under the L/C. The buyer notifies the
issuing bank not to make payment because there is a
dispute over the quality of the merchandise. However, the
,documents received fully comply with the terms of the
L/C. Which of the following statements is true?
A. The buyer may immediately return the merchandise
and cancel the L/C.
B. The bank may delay payment until reimbursed by the
buyer.
C. The bank may delay payment, provided the seller is
notified of the dispute within three business days. D. The
bank must make payment and is entitled to immediate
reimbursement from the buyer. - correct answer-
A buyer receives an invoice from a supplier that offers
discount terms of 3/10, net 60. What is the effective cost
of discount?
A. 15.64% B. 16.13% C. 21.90% \
D. 22.58% - correct answer- D
,A cash manager has determined that the break-even
amount for justifying a wire transfer over an ACH for
concentration of funds is $145,000. Using a wire instead
of an ACH givesthe company use of the funds two days
earlier to make overnight investments. Based on a wire
transfer cost of $10.00 and an ACH transaction cost of
$0.70, what is the company's overnight investment
interest rate on a 365-day year basis?
A. 0.95% B. 1.17% C. 2.34% D. 2.57% - correct
answer- B
A company enters into a cash flow hedge to offset
fluctuations in the value of foreign currency transactions
occurring in two years. How should the company record
the gains and/or losses on the cash flow hedge in the
current year?
A. The hedged gains and losses are reported in
comprehensive income. B. The hedged gains and losses
are reported in current period income. C. The hedged
gains and losses are reported in current period income
, together with the offsetting gains and losses of the foreign
currency. D. The hedged gains and losses are reported in
comprehensive income together with the offsetting gains
and losses of the foreign currency. - correct
answer- A
A company has a line of credit and a bond trustee
agreement with a bank. To prevent a decline in the
company's bond rating from having a negative impact on
the company's line of credit, the bank should have which
of the following in place?
A. Code of conduct
B. Confidentiality agreement
C. Notional barrier
D. Risk profile - correct answer- C
A company has negotiated a credit facility with the
following terms:
