Chapter 5 - TM

Loss exposures related to treasury management may include which of the following? A. Excessive product recalls B. PBGC violations C. Deterioration of investment principal D. Bank consolidations

C. Deterioration of investment principal

Which is a LIBOR- or Euribor-based investment with 1+-year typical maturities but a wider bid-offer spread, so regular trading can erode its yield advantage quickly? A. Government paper B. Floating rate notes (FRNs) C. Retail CDs D. Repurchase agreements (repos)

B. Floating rate notes (FRNs)

Money market funds are able to obtain very competitive trading terms because: A. There is no diversification B. Of the economies of scale C. Invested funds are locked in for a specific period of time D. The investment manager only purchases high yielding instruments

B. Of the economies of scale

Company XYZ is conservative when investing in their short-term portfolio. XYZ is looking to add the following money market instruments in their own country: a reverse re-purchase agreement, a floating-rate note, and a negotiable certificate of deposit. What types of investment risks are associated with these instruments? A. Default and reinvestment risk B. Liquidity and price risk C. Credit and liquidity risk D. Default and payment risk

C. Credit and liquidity risk

Which type of investment risk includes price risk and reinvestment risk? A. Credit or default risk B. Asset liquidity risk C. Interest rate risk D. FX risk

C. Interest rate risk

Senior management at ABC Company plans to make a large capital expenditure to bolster its infrastructure exactly one year from now. Their primary concern is to preserve the current capital position until the expected cash outlay. The majority of the cash at ABC Company is held in treasury notes, but management would like to also invest some of the money into corporate bonds and money market funds. Which investment objective BEST suits the needs of ABC Company? A. Exposure Horizon B. Diversification C. Liquidity D. Safety

D. Safety

Which of the following is NOT true for both banker's acceptances and trade acceptances? A. They are both used to finance the shipment of goods B. They both may be sold to an investor at a discount prior to maturity C. They are both less expensive forms of financing than loans

D. They both transfer the buyer's credit risk to a third party