CTP SAMPLE TEST QUESTIONS WITH
ACCURATE ILLUSTRATIONS; NEWLY
UPDATED; VERIFIED ANSWERS
. ABC Company's treasury department outsourced its overnight
investment duties to XYZ Money Management. XYZ placed the
funds received from ABC into corporate commercial paper,
which has recently gone into default after numerous ratings
downgrades. The investment policy of ABC Company states that
all investments must be in investment grade commercial paper;
however, the agreement gives XYZ the ability to make
exceptions with the approval of the treasurer of ABC Company.
The treasurer was never notified of the ratings downgrades.
What role or responsibility, if any, was violated with regards to
the investment policy? - correct answer- Policy
approvals and exception management
A $100,000 T-bill currently sells for $98,600 and matures in 90
days. What is the 365 day basis yield for this investment? -
correct answer- 5.76%
A $100,000 T-bill currently sells for $98,600 and matures in 90
days. What is the discount rate for this investment? - correct
answer- 5.60%
,A cash manager at a retailer forecasts a positive collected cash
position for the end of the current day. The company has an
overdraft facility at 10%, a separate investment account earning
8% before taxes, an earnings credit rate of 8% and an
outstanding single payment note at 9.5% maturing in 1 week.
This month's bank service fees are expected to exceed the
earnings credit. Which of the following intra-day options would
be the MOST economically positive for the company? -
correct answer- Leave the funds in the account
A company can pay their supplier by check or by electronic
transfer. If the difference between the value date of the
payment methods is 4 days from the company's perspective,
what discount should the supplier offer them to get the
company to pay on the same day as they did when they paid by
check (rounded to the nearest 100th percent)? Assume no
difference in the cost of the payment method, an opportunity
cost of 8%, and float neutrality. - correct answer-
0.09%
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? - correct
answer- The hedged gains and losses are reported in
comprehensive income
,A company has asked its marketing, payroll and sales teams to
collaborate in finding a solution that could augment its customer
base, reduce payroll cost and increase sales. The solution has to
be market ready. Which of the following will serve all 3
purposes? - correct answer- Stored value card
A company has decided to manage its short-term investment
portfolio in-house. It is looking for enhanced capital gains as well
as the ability to sell the instruments on the secondary market at
a premium. The investment manager has forecasted the interest
rates shown below:
Month Short-term rates Long-term rates
January 0.25% 0.27%
February 0.28% 0.30%
March 0.26% 0.29%
April 0.24% 0.27%
May 0.25% 0.28%
June 0.26% 0.29%
Which investment strategy should be employed by the
company? - correct answer- Total-return strategy
, A company has grown quickly in the euro zone market. It wants
to maximize its excess cash. Which would be the BEST method of
concentrating funds? - correct answer- Physical
Pooling
A company hires an investment firm to fully underwrite a new
stock issuance. Which of the parties carries the MOST risk? -
correct answer- The investment firm
A company in the market to purchase a treasury management
system (TMS) has issued a request for proposal to evaluate
various vendors. One of the evaluation factors focuses on the
long-term viability of the vendor. The company may have to
choose between an untested new vendor with a superior
product and an established vendor with an incomplete product
suite. This dimension of the RFP is measuring what type of risk?
- correct answer- Supplier risk
A company is based in the United States and has an operating
subsidiary in Germany. With a stable U.S. dollar and a
depreciating euro, the company's cash manager may elect to: -
correct answer- Start leading receivables from the
German subsidiary
ACCURATE ILLUSTRATIONS; NEWLY
UPDATED; VERIFIED ANSWERS
. ABC Company's treasury department outsourced its overnight
investment duties to XYZ Money Management. XYZ placed the
funds received from ABC into corporate commercial paper,
which has recently gone into default after numerous ratings
downgrades. The investment policy of ABC Company states that
all investments must be in investment grade commercial paper;
however, the agreement gives XYZ the ability to make
exceptions with the approval of the treasurer of ABC Company.
The treasurer was never notified of the ratings downgrades.
What role or responsibility, if any, was violated with regards to
the investment policy? - correct answer- Policy
approvals and exception management
A $100,000 T-bill currently sells for $98,600 and matures in 90
days. What is the 365 day basis yield for this investment? -
correct answer- 5.76%
A $100,000 T-bill currently sells for $98,600 and matures in 90
days. What is the discount rate for this investment? - correct
answer- 5.60%
,A cash manager at a retailer forecasts a positive collected cash
position for the end of the current day. The company has an
overdraft facility at 10%, a separate investment account earning
8% before taxes, an earnings credit rate of 8% and an
outstanding single payment note at 9.5% maturing in 1 week.
This month's bank service fees are expected to exceed the
earnings credit. Which of the following intra-day options would
be the MOST economically positive for the company? -
correct answer- Leave the funds in the account
A company can pay their supplier by check or by electronic
transfer. If the difference between the value date of the
payment methods is 4 days from the company's perspective,
what discount should the supplier offer them to get the
company to pay on the same day as they did when they paid by
check (rounded to the nearest 100th percent)? Assume no
difference in the cost of the payment method, an opportunity
cost of 8%, and float neutrality. - correct answer-
0.09%
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? - correct
answer- The hedged gains and losses are reported in
comprehensive income
,A company has asked its marketing, payroll and sales teams to
collaborate in finding a solution that could augment its customer
base, reduce payroll cost and increase sales. The solution has to
be market ready. Which of the following will serve all 3
purposes? - correct answer- Stored value card
A company has decided to manage its short-term investment
portfolio in-house. It is looking for enhanced capital gains as well
as the ability to sell the instruments on the secondary market at
a premium. The investment manager has forecasted the interest
rates shown below:
Month Short-term rates Long-term rates
January 0.25% 0.27%
February 0.28% 0.30%
March 0.26% 0.29%
April 0.24% 0.27%
May 0.25% 0.28%
June 0.26% 0.29%
Which investment strategy should be employed by the
company? - correct answer- Total-return strategy
, A company has grown quickly in the euro zone market. It wants
to maximize its excess cash. Which would be the BEST method of
concentrating funds? - correct answer- Physical
Pooling
A company hires an investment firm to fully underwrite a new
stock issuance. Which of the parties carries the MOST risk? -
correct answer- The investment firm
A company in the market to purchase a treasury management
system (TMS) has issued a request for proposal to evaluate
various vendors. One of the evaluation factors focuses on the
long-term viability of the vendor. The company may have to
choose between an untested new vendor with a superior
product and an established vendor with an incomplete product
suite. This dimension of the RFP is measuring what type of risk?
- correct answer- Supplier risk
A company is based in the United States and has an operating
subsidiary in Germany. With a stable U.S. dollar and a
depreciating euro, the company's cash manager may elect to: -
correct answer- Start leading receivables from the
German subsidiary
