, PLEASE USE THIS DOCUMENT AS A GUIDE ONLY
SECTION A
1. Treasury management is executed in any business, irrespective of its size, structure, or
industry. Which of the following activities does not fall directly under the corporate treasury
management functions in business?
The correct answer is 3. b and c.
2. Which of the following statements below are correct about the interest rate swaps? An
interest rate swaps involves counterparties who want to exchange
The correct answer is 1. a.
3. Suppose the Gauteng subsidiary is informed that it must finance its cash deficit with a
revolving credit from Capitec Bank. Calculate the interest that the subsidiary will pay should it
use the funds for 29 days, and that the interest is calculated on a daily basis in the box below.
(Use 365 days.)
The Gauteng subsidiary has a credit balance of -R350 000, which means it is overdrawn by R350
000 (a deficit).
Interest payable = Principal × Rate × (Days / 365)
= R350 000 × 10% × ()
= R350 000 × 0.10 × 0.079452
= R2 780.82
4. If Parmalat does not arrange for cash pooling and every subsidiary handles its cash
separately with its individual bank account. Calculate the net or combined interest amount
payable/earned by the four subsidiaries in the box provided below. (Assume the funds remain
static for a year)
Without cash pooling, each subsidiary handles its own surplus/deficit:
Limpopo: Debit balance of R400 000 → deficit → pays interest:
R400 000 × 10% = R40 000 (cost)
Gauteng: Credit balance of -R350 000 → deficit → pays interest:
R350 000 × 10% = R35 000 (cost)
KZN: Debit balance of R200 000 → surplus (positive) → earns interest:
R200 000 × 7% = R14 000 (income)
Northwest: Debit balance of R100 000 → surplus → earns interest:
R100 000 × 7% = R7 000 (income)
Net interest = (R40 000 + R35 000) − (R14 000 + R7 000)
= R75 000 − R21 000
= R54 000 payable (net cost)
SECTION A
1. Treasury management is executed in any business, irrespective of its size, structure, or
industry. Which of the following activities does not fall directly under the corporate treasury
management functions in business?
The correct answer is 3. b and c.
2. Which of the following statements below are correct about the interest rate swaps? An
interest rate swaps involves counterparties who want to exchange
The correct answer is 1. a.
3. Suppose the Gauteng subsidiary is informed that it must finance its cash deficit with a
revolving credit from Capitec Bank. Calculate the interest that the subsidiary will pay should it
use the funds for 29 days, and that the interest is calculated on a daily basis in the box below.
(Use 365 days.)
The Gauteng subsidiary has a credit balance of -R350 000, which means it is overdrawn by R350
000 (a deficit).
Interest payable = Principal × Rate × (Days / 365)
= R350 000 × 10% × ()
= R350 000 × 0.10 × 0.079452
= R2 780.82
4. If Parmalat does not arrange for cash pooling and every subsidiary handles its cash
separately with its individual bank account. Calculate the net or combined interest amount
payable/earned by the four subsidiaries in the box provided below. (Assume the funds remain
static for a year)
Without cash pooling, each subsidiary handles its own surplus/deficit:
Limpopo: Debit balance of R400 000 → deficit → pays interest:
R400 000 × 10% = R40 000 (cost)
Gauteng: Credit balance of -R350 000 → deficit → pays interest:
R350 000 × 10% = R35 000 (cost)
KZN: Debit balance of R200 000 → surplus (positive) → earns interest:
R200 000 × 7% = R14 000 (income)
Northwest: Debit balance of R100 000 → surplus → earns interest:
R100 000 × 7% = R7 000 (income)
Net interest = (R40 000 + R35 000) − (R14 000 + R7 000)
= R75 000 − R21 000
= R54 000 payable (net cost)
