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CTP Certified Treasury Professional Questions and Answers

Questions 4

As a result of an employee's intentional actions, an electronic payment to a supplier was misdirected to an unauthorized account. This is an example of which of the following types of risk?

Options:

A.

Process and technology risks

B.

Employee and technology risks

C.

Process and valuation risks

D.

Employee and process risks

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Questions 5

The Sarbanes-Oxley Act of 2002:

Options:

A.

created the Financial Accounting Standards Board.

B.

created the Public Company Accounting Oversight Board.

C.

created the Public and Private Corporate Governance Board.

D.

created the International Accounting Standards Convergence Board.

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Questions 6

A merchant closes its day with a total of 100 credit card transactions of an average ticket value of $100. The interchange reimbursement fees are 2% and transaction fees are $0.05. If this merchant receives gross settlement, what would be the value of deposit to the account for that day?

Options:

A.

$9,795

B.

$9,800

C.

$9,995

D.

$10,000

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Questions 7

Which of the following correctly describes pooling as practiced in the European cash management environment?

Options:

A.

It can be facilitated between banks.

B.

The accounts of a parent company and its subsidiaries may be aggregated.

C.

It is accomplished through multicurrency accounts in one country.

D.

A company need not arrange credit facilities for negative balances.

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Questions 8

When establishing a retail collection system that accepts consumer debit cards, a company must comply with which Federal Reserve regulation?

Options:

A.

CC

B.

D

C.

E

D.

Q

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Questions 9

Which of the following ways of financing accounts receivable requires a company to relinquish control of the type of customer to which it sells?

Options:

A.

Securitization

B.

Using captive finance subsidiaries

C.

Third-party financing

D.

Unsecured borrowing

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Questions 10

Which of the following factors will allow a company to decrease the amount of collected balances required to compensate its bank for services?

Options:

A.

An increase in the bank's earnings credit rate

B.

An increase in the bank's reserve requirement

C.

An increase in FDIC insurance charges

D.

A carry-over of a prior period's deficient balance

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Questions 11

Which of the following is a common approach to negotiating EDI payment terms versus paper payment terms?

Options:

A.

Offering lower discounts for electronic payments than for paper payments

B.

Offering payment terms that are float-neutral for both payment formats

C.

Making the electronic payments due earlier than paper payments

D.

Having the same due date for electronic and paper payments

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Questions 12

In a large company, the person who normally oversees both the treasury and the accounting functions is the:

Options:

A.

treasurer.

B.

chief operations officer.

C.

chief financial officer.

D.

controller.

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Questions 13

A U.S. government agency issues securities transfers using Fedwire Book-Entry Securities System. The first transfer request of the day in the amount of $1 million is sent at 1:00 p.m. EST, the second one for $2 million at 3:30 p.m. EST, the third one for $3 million at 4:30 p.m. EST and the fourth one for $4 million at 5:00 p.m. EST, all on the same day. Which of the following represents the total value transferred at 5:00 p.m. EST that day?

Options:

A.

$1 million

B.

$3 million

C.

$6 million

D.

$10 million

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Questions 14

Usually, corporations receiving dividends from another corporation can exclude 70 percent of dividend payments from income for tax purposes as long as the stock is owned for at least:

Options:

A.

30 days.

B.

45 days.

C.

60 days.

D.

90 days.

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Questions 15

Which of the following is a true statement about operating leverage?

Options:

A.

The higher the company’s fixed costs are, the lower its operating leverage.

B.

The higher the company's fixed costs are, the higher its operating leverage.

C.

The lower the company's fixed costs are, the higher its operating leverage.

D.

The higher the company's variable costs are, the higher its operating leverage.

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Questions 16

Which of the following can be related to a company’s stock price?

Options:

A.

Economic Value Added

B.

Residual Income

C.

Return on Investment

D.

Operating Profit

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Questions 17

A cash manager is responsible for a small subsidiary that has significant funds but only writes one check per month. Which of the following types of accounts would the cash manager use for this subsidiary?

Options:

A.

NOW

B.

Demand deposit

C.

Savings

D.

Money Market Deposit Account

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Questions 18

The treasury management department of a company hires a consulting firm to provide research on how other companies in the industry have structured their treasury operations. This is an example of which practice?

Options:

A.

Outsourcing

B.

Benchmarking

C.

Re-engineering

D.

Restructuring

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Questions 19

A Chicago meat processor is concerned about the volatility of pork belly prices. Which of the following derivative products would be used to fix these prices within a given range?

Options:

A.

Collar

B.

Swap

C.

Cap

D.

Spot purchase

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Questions 20

In which of the following instances does the clientele effect come into play?

Options:

A.

When a company announces its earnings forecast

B.

When a company submits its 10-Q to the SEC

C.

When a company declares a dividend

D.

When a company increases its sales

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Questions 21

All of the following are an EDI benefit EXCEPT:

Options:

A.

improved productivity.

B.

lower error rates.

C.

improved cash forecasting.

D.

lower start-up costs.

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Questions 22

The earnings allowance rate applied to collected balances is usually determined by which of the following rates?

Options:

A.

90-day T-bill

B.

LIBOR

C.

Prime

D.

Fed Funds

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Questions 23

All of the following are common consumer-to-corporate international payment mechanisms EXCEPT:

Options:

A.

giros.

B.

debit cards.

C.

CHIPS.

D.

smart cards.

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Questions 24

A cash manager invests in Treasury bills for which of the following reasons?

Options:

A.

The interest earned is exempt from federal taxes.

B.

There is no price risk.

C.

They are extremely liquid.

D.

They offer the highest yield for overnight investing.

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Questions 25

A lockbox provider offers which of the following advantages over a company processing center?

I. It increases the company's operational control.

II. It produces processing economies of scale.

III. It allows for external audit controls.

IV. It reduces collection float.

Options:

A.

I only

B.

II and III only

C.

I, II, and III only

D.

II, III, and IV only

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Questions 26

A company has six fraudulent checks clear its primary disbursement account for a total of $7,652. The bank agrees to split the loss with the company to maintain a good relationship. As a condition of sharing the expense, the bank requires the company to establish positive pay on its disbursement accounts or have the company absorb the losses on future fraudulent payments.

What type of risk financing technique is the bank using?

Options:

A.

Crime insurance

B.

Self-insurance

C.

Risk retention

D.

Risk transfer

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Questions 27

A UK based manufacturer has a subsidiary in Belgium and a manufacturing plant in Italy. The subsidiary wants to sell its products in Sweden. How would the UK parent best structure the movement of funds within the organization to optimize management of working capital while ensuring recourse?

Options:

A.

Internal factoring

B.

Re-invoicing

C.

Export financing

D.

Multilateral netting

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Questions 28

All of the following are discounted instruments EXCEPT:

Options:

A.

preferred stock.

B.

banker's acceptance.

C.

commercial paper.

D.

Treasury bills.

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Questions 29

A company has six fraudulent checks clear its primary disbursement account for a total of $7,652. The bank agrees to split the loss with the company to maintain a good relationship. As a condition of sharing the expense, the bank requires the company to establish positive pay on its disbursement accounts or have the company absorb the losses on future fraudulent payments.

If the company determines that positive pay is too expensive and decides NOT to implement it, what type of risk financing technique is the company using?

Options:

A.

Crime insurance

B.

Self-insurance

C.

Risk avoidance

D.

Risk transfer

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Questions 30

EDI infrastructure includes which of the following four PRIMARY components?

Options:

A.

Communication networks and standards, computer hardware, EDI software, and standard formats

B.

Business-to-business banking services, EDI e-commerce, EDI software, and electronic payments networks

C.

Authentication devices, evaluated receipts settlement, firewalls, and single sourcing arrangements

D.

File transfer protocol, hypertext transfer protocol, uniform resource locator, and Extensible Markup Language (XML)

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Questions 31

The following information about a company is at the end of its fiscal year.

CTP Question 31

The before-tax cost of long-term debt is 10% and the cost of equity is 12%. The marginal tax rate is 35%. The company's current ratio is:

Options:

A.

0.46.

B.

0.59.

C.

0.93.

D.

1.37.

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Questions 32

An arrangement in which a borrower makes periodic payments to a separate custodial account that is used to repay debt is known as a:

Options:

A.

sinking fund

B.

balloon payment

C.

mortgage

D.

zero-coupon bond

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Questions 33

Future treasury operations will be affected MOST significantly by consolidation of which of the following?

Options:

A.

Competitors

B.

Subsidiaries

C.

Commercial banking industry

D.

Procurement cards

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Questions 34

The Governmental Accounting Standards Board (GASB) is the authoritative standard-setting body for which of the following?

Options:

A.

Private universities

B.

Healthcare organizations

C.

Public works agencies

D.

Publicly traded companies

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Questions 35

What kind of budget forecasts the cost for investing activities?

Options:

A.

Operating budget

B.

Sales budget

C.

Maintenance budget

D.

Capital budget

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Questions 36

A telecommunications company receives a profit of $587,542 from its cellular phone production unit in the year after investing $962,870 in a new product line. What is the first year return on its original investment?

Options:

A.

56%

B.

58%

C.

61%

D.

64%

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Questions 37

Regarding dividends, on which of the following dates would a company's current assets be reduced?

Options:

A.

Declaration date

B.

Ex-dividend date

C.

Payment date

D.

Record date

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Questions 38

Kahuna Boards Co. has just experienced a very profitable year and wants to share the success with its shareholders. In order to pay dividends, a sequence of events must occur. Which of the following chronological sequence of events is correct?

1. Stock is sold without the upcoming dividend attached.

2. Dividend is paid.

3. Board of directors announces the dividend.

4. Holders of record are specified.

Options:

A.

3, 4, 1, 2

B.

3, 4, 2, 1

C.

4, 3, 2, 1

D.

4, 3, 1, 2

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Questions 39

A foreign company could raise capital in the United States using an:

Options:

A.

ASP.

B.

ADR.

C.

ARC.

D.

AVS.

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Questions 40

Companies in the U.S. with a nationwide over-the-counter/field bank collection and concentration system often deal with:

Options:

A.

few small financial institutions.

B.

one major banking institution with branch offices at all locations.

C.

many small financial institutions.

D.

one major bank with corresponding relationships.

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Questions 41

In the event of bankruptcy and the subsequent liquidation of issuer's debt, in what order, from first to last, will the following be repaid?

1. Senior secured debt

2. Senior subordinated debt

3. Junior secured debt

4. Junior debentures

Options:

A.

1, 2, 3, 4

B.

1, 3, 2, 4

C.

2, 1, 3, 4

D.

2, 1, 4, 3

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Questions 42

ABC company has a significant number of customers who are mainly consumers making monthly installment payments. Which one of the following types of lockbox would be the MOST appropriate for ABC to use?

Options:

A.

Wholesale

B.

Retail

C.

In-house

D.

Hybrid

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Questions 43

One reason for charging management fees to subsidiaries is to:

Options:

A.

justify to local governments the flow of funds to the parent company.

B.

mitigate shareholder concerns about the large investments needed for overseas ventures.

C.

minimize the impact of call provisions generally associated with overseas investing.

D.

help reduce the variability of parent and subsidiary future cash flow.

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Questions 44

A major toy retailer operates 65 stores throughout the Midwest. Which of the following collection methods is MOST LIKELY to be used by this company?

Options:

A.

Field deposit

B.

Preauthorized debit

C.

Direct deposit

D.

Wholesale lockbox

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Questions 45

In predicting collections from credit sales, a cash manager can obtain prior period information from which of the following sources?

I. Customer payment histories

II. The company's concentration bank

III. The accounts receivable department

IV. The accounts payable department

Options:

A.

I and II only

B.

III and IV only

C.

I and III only

D.

I, III, and IV only

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Questions 46

Which of the following is a regulation that is having a major impact on the treasury profession?

Options:

A.

Gramm-Leach-Bliley Act

B.

Monetary Control Act

C.

Patriot Act

D.

Glass-Steagall Act

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Questions 47

A U.S. company is selling product for US$10,000 to a Canadian company with payment in Canadian dollars. The exchange rate has been booked at C$1.45/US $1 for payment upon delivery in 15 days. The Canadian dollar is forecasted to weaken within this period. This is an example of A.

Options:

A.

forward transaction at a premium.

B.

forward transaction at a discount.

C.

spot transaction at a premium.

D.

spot transaction at a discount.

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Questions 48

Which statement is true about credit unions?

Options:

A.

They offer lending rates similar to other financial institutions.

B.

They are not-for-profit organizations.

C.

Their deposits are insured by the FDIC.

D.

They can only be chartered by state agencies.

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Questions 49

Which of the following actions would the CFO of a Canadian multinational conglomerate MOST LIKELY take to repatriate profits from its international subsidiaries?

Options:

A.

Re-invoicing

B.

Multilateral netting

C.

Unbundle cash flows

D.

Pooling

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Questions 50

A nationwide discount retailer is re-evaluating financing methods since the most-popular and most-expensive electronics “must-have” item for this year is set to ship from factories in China. Which of the following credit facilities would be MOST effective for the retailer to use?

Options:

A.

Factoring

B.

Asset-based credit line

C.

Securitization

D.

Commercial paper issuance

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Questions 51

On June 1, a manufacturing company experienced a system failure that lasted more than 24 hours. The company did not have any contingency plans in place and as a result the cash manager was unable to process the following payments: $25,000 to the p-card issuer, $125,000 for weekly payroll, $500,000 for a bond interest payment, $260,000 for the weekly vendor payments and $50,000 for the monthly utilities. The receivables were deposited at the bank; however, the cash manager does not have a way to confirm the amounts. The suppliers are threatening to stop shipments due to the delay in payment and the loss of supplier shipments threatens the company’s just-in-time production. What did the manufacturing company trigger as a result of the system failure?

Options:

A.

Supplier risk

B.

Default on the debt

C.

Electronic security risk

D.

Contingency business resumption plan failure

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Questions 52

Kensley Biscuit Company Ltd. decides to invest £125,000 in new packaging equipment to help it keep up with increased demand. As a result of this investment, the company’s annual profit improves by £11,763. If Kensley’s cost of capital is 8.25% and its corporate tax rate is 42%, what is its residual income (RI) from the investment?

Options:

A.

£842

B.

£970

C.

£1,451

D.

£11,763

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Questions 53

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:

CTP Question 53

Which investment strategy should be employed by the company?

Options:

A.

Passive strategy

B.

Matching strategy

C.

Tax-based strategy

D.

Total-return strategy

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Questions 54

XYZ Inc. has limited cash flow, total liabilities to total assets greater than 52%, and a high WACC. To help meet the goal of lowering their WACC, the company plans to issue several million dollars of private equity to the chairman of the board. If the company proceeds with this plan, the company may:

Options:

A.

not comply with SOX requirements.

B.

violate shareholder pre-emptive rights.

C.

require approval from PCAOB.

D.

need to report the large currency transaction.

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Questions 55

Company ABC has undergone substantial system enhancements in order to take advantage of B2B efficiencies. To encourage its trading partners, ABC has offered a 1.5% discount to those who allow ABC to debit their bank account electronically on the day the product is delivered. The greater number of trading partners who agree to this arrangement, the greater improvement Company ABC will see in its:

Options:

A.

days’ inventory.

B.

cash flow to total debt.

C.

days’ payables.

D.

cash turnover ratio.

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Questions 56

After several internal discussions about treasury management systems (TMSes), ABC Company has determined that it has no need for customization but that it does want a backup for high priority capabilities. The company wants to reduce its IT costs and resources but still have IT support with in-depth knowledge of the solutions available. These parameters will MOST LIKELY result in what kind of TMS?

Options:

A.

An ERP module TMS

B.

An integrated TMS

C.

A hosted ASP TMS

D.

Development of its own TMS

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Questions 57

Which of the following is true of return on investment (ROI)?

Options:

A.

It includes a charge for the cost of capital in a project.

B.

It is commonly used to calculate after-tax profitability.

C.

It may cause management to accept a project with positive NPV.

D.

It is calculated as profit per dollar of invested capital.

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Questions 58

An asset-based lender has decided to provide a loan to a company. In order to perfect its security interest in the assets used as collateral with the potential borrower, the lender will be MOST interested in reviewing which of the following?

Options:

A.

Book value of inventory

B.

Delinquency payment record

C.

Lien search findings

D.

Age of receivables

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Questions 59

The U.S. Congress established the.

Options:

A.

UCC.

B.

FinCEN.

C.

OCC.

D.

OFAC.

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Questions 60

Which of the following is true about using an RFI in the financial institution and FSP selection process?

Options:

A.

RFI is a formal document that outlines objectives, needs and service requirements.

B.

An RFI can speed up the review process.

C.

A response to an RFI is a formal commitment for services.

D.

A response to an RFI is a binding agreement.

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Questions 61

Corporate governance for publicly traded U.S. companies includes:

Options:

A.

the roles and responsibilities of independent directors.

B.

full compliance with local and state regulations.

C.

the structure and organization of executive management.

D.

timely and complete submission of audited financial statements with the SEC.

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Questions 62

The USA Patriot Act has added significant amounts of overhead to financial transaction processing organizations to prevent money laundering. If an organization does NOT comply with the terms of this act, what external risk is it exposed to?

Options:

A.

Fraud/theft

B.

Legal/regulatory

C.

Financial/budgetary

D.

Procedure/policy

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Questions 63

Exhibit:

CTP Question 63

What is the price to earnings ratio for Company ABC?

Options:

A.

3.88

B.

7.50

C.

8.33

D.

10.00

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Questions 64

In terms of targeting a company’s capital structure, when is it beneficial to assume a high level of financial risk?

Options:

A.

When the economy is rapidly expanding

B.

When the economy is experiencing slow growth

C.

When the company is experiencing growth

D.

When the rate of return on investments is advantageous

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Questions 65

The main objective of a company's international cash management function is to:

Options:

A.

reduce cross-border fund transfers.

B.

collect and disburse cash.

C.

optimize global cash resources.

D.

minimize foreign exchange risk.

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Questions 66

As a result of the Sarbanes-Oxley Act, what new entity was established to sanction firms and individuals for audit violations?

Options:

A.

The Sarbanes-Oxley Review and Assessment Board

B.

The Accounting Controls Advisory Board

C.

The Public Company Accounting Oversight Board

D.

The Auditing Review Board

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Questions 67

Which of the following must be considered when designing the basic framework for a cash management system?

Options:

A.

Industry standards and practices

B.

SEC regulations

C.

FASB rulings

D.

Public company listing guidelines

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Questions 68

When projecting the closing cash position, a cash manager must estimate which of the following?

Options:

A.

ACH credits

B.

Lockbox receipts

C.

Checks in the process of collection

D.

Clearings on non-controlled disbursement accounts

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Questions 69

Disbursement float includes which of the following three float time intervals?

Options:

A.

Mail, processing, and availability float

B.

Mail, invoicing, and availability float

C.

Mail, processing, and clearing float

D.

Mail, invoicing, and clearing float

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Questions 70

Which of the following is an important component of corporate governance?

Options:

A.

The existence of a large number of institutional investors

B.

The activities of independent outside auditors

C.

The existence of a matrix management structure

D.

The level of compliance with GAAP

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Questions 71

A main characteristic of a company with regional offices using a centralized treasury function is:

Options:

A.

high level of control.

B.

increased borrowing costs.

C.

centrally determined depository accounts.

D.

increased operating costs.

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Questions 72

XYZ Company's cash manager is evaluating cash concentration transfer options. The company has an 8% cost of funds and $50,000 in average daily field cash receipts. The wire transfer results in the transfer of funds one day faster. Which of the following options correctly ranks the transfer choices from most cost-effective to least cost-effective?

1. Electronic depository transfer costing $1.00

2. Electronic depository transfer costing $2.50

3. Wire transfer costing $8.00

4. Wire transfer costing $15.00

Options:

A.

1, 2, 3, 4

B.

1, 3, 2, 4

C.

3, 1, 2, 4

D.

3, 4, 1, 2

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Questions 73

Which of the following payment instruments is initiated by the payee rather than the payor?

Options:

A.

Travelers checks

B.

Pre-authorized drafts

C.

Government warrants

D.

Money orders

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Questions 74

XYZ Company is interested in issuing a bond to finance a new venture opportunity. The new venture is not expected to generate any cash flow for several years. Because of this, XYZ Company would prefer to issue a bond that does not require interest payments. What type of bond should XYZ Company issue?

Options:

A.

Zero-coupon bond

B.

Municipal bond

C.

Tender option bond

D.

High-yield bond

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Questions 75

A North American service company has autonomous offices in different geographic regions each handling their own sales and accounts receivables deposits to local banks which primarily consist of checks. By implementing a lockbox collection system, what objective in its collection policy would it have met?

Options:

A.

Payment float

B.

Cost efficiency

C.

Segregation of duties

D.

Customer satisfaction

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Questions 76

An analyst at Davis Company uses the tax payment (TXP) banking convention for payment of state taxes. The analyst is preparing to pay $650,000 in taxes to the state where Davis Company is domiciled. What payment method will the analyst use to make the tax payment?

Options:

A.

ACH Credit

B.

Fedwire Credit

C.

Certified Check

D.

Multiple Drawee Check

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Questions 77

A publicly held U.S. company has reported at the beginning of the year that it expects to increase shareholder value by 5%. The current expectations are for interest rates to remain steady with a decline in fourth quarter. Treasury policy requires that investments be 90 days or less and investment grade. How should the company invest excess cash to support this goal?

Options:

A.

Commercial paper

B.

High-yield bonds

C.

16-week U.S. Treasury bill

D.

BB rated bond

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Questions 78

A treasury manager has $5 million that is not needed for 6 months. The treasury manager has decided to invest the funds in a liquid instrument, using the current portion of a 5-year AA rated corporate bond that is subject to U.S. Securities and Exchange Commission (SEC) regulations. In what market would the treasury manager purchase this investment?

Options:

A.

IPO Market

B.

Private Market

C.

Primary Market

D.

Secondary Market

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Questions 79

QRT Corporation uses exponential smoothing in its cash flow forecasting model. Five days are used to calculate the moving average forecast.

CTP Question 79

If the value of the smoothing constant is .60, what is the exponential smoothing forecast for day 7?

Options:

A.

$2,000,000

B.

$2,052,000

C.

$2,060,000

D.

$2,400,000

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Questions 80

Company ABC experienced a loss in the past when an employee in the treasury department was able to transfer $1.5 million to a personal account offshore. The company is working with a security agent to prevent this from happening in the future. ABC also accepts a large number of checks as payment. The agent has suggested upgrades to ABC’s payment process. What step should be taken to help mitigate this type of risk in the future?

Options:

A.

Securely store check stock.

B.

Set up international bank security.

C.

Implement dual approval.

D.

Implement data security standards.

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Questions 81

The Cash Manager of ABC Logistics, Inc. sets a daily cash position by noon. All departments have been given an 11 a.m. cut-off for presenting wire requests and 2 p.m. for ACH requests. A wire request came in at 3:30 p.m. to make an insurance premium payment, in order to receive a discount. What liquidity reserve requirement is impacted?

Options:

A.

Regulatory

B.

Transaction

C.

Opportunistic

D.

Precautionary

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Questions 82

The Treasurer of a company would like to establish an investment policy for the organization. One objective that should be included in the investment policy that would BEST allow the organization to limit its exposure to a particular market sector would be to:

Options:

A.

perform a risk analysis.

B.

develop an exposure horizon.

C.

establish ratings requirements.

D.

set diversification requirements.

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Questions 83

ABL Corporation is currently receiving a return of 10% on its investments. The bank is offering them an ECR of 15%. In order to get more value for their money ABL Corp. has decided to take advantage of the higher ECR and use funds from its Money Market Accounts to cover bank service charges.

CTP Question 83

If ABL already has an average ledger balance of $750,000, how much more do they need to deposit on their account to cover all $10,000 of monthly service charges?

Options:

A.

$136,111.11

B.

$736,111.11

C.

$811,111.11

D.

$886,111.11

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Questions 84

The Treasury Manager of a chain of department stores wants to develop a medium-term forecast. Management plans to open two new stores, and anticipates same-store sales to increase by 15%. Which of the following items can be predicted with the highest degree of certainty?

Options:

A.

Taxes on stock options

B.

New product sales

C.

Fixed bond interest payment

D.

Refranchising proceeds

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Questions 85

XYZ Company is a U.S. based company that has just issued some euro-denominated bonds in London. The bonds have a duration of 10 years at a rate of 3.5% with a par value of EUR 50 million. An FX swap contract was created on the date of the issuance in EUR/USD, with a spot rate of 1.2908 and a forward rate of 1.1102. This bond is subject to what type of risk?

Options:

A.

Interest rate

B.

Currency

C.

Floating rate

D.

Duration

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Questions 86

Company XYZ is aggressively expanding globally. It is evaluating four markets: Latin America, Europe, Asia and Middle East.

Latin AmericA. Risk adjusted discount ratE. 15%, Payback period=7 years, IRR=15%

EuropE. Risk adjusted discount ratE. 8%, NPV=$20M

Middle East: Risk adjusted discount ratE. 11%, IRR=12%, NPV=$5M

AsiA. WACC. 9%, Payback=2 yrs, IRR=8%

Based on the information, which two markets will company XYZ MOST LIKELY pursue?

Options:

A.

Europe and Asia

B.

Asia and Latin America

C.

Europe and Middle East

D.

Middle East and Latin America

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Questions 87

West Coast Retail Shop has experienced reduced cash availability in its bank account since a new store manager was hired. The manager is responsible for manually preparing daily bank deposits, which generally include a large number of checks, for processing at a bank branch in the same shopping mall as the store. Which of the following should West Coast Retail Shop implement to improve the available balance in its bank account?

Options:

A.

A Point-of-Purchase check conversion process

B.

An Image Replacement Document conversion process

C.

Transit check clearing

D.

A direct exchange with local banks

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Questions 88

An equity management company’s Chief Financial Officer and Treasurer are evaluating their corporate investments and decide that they need to diversify their stock holdings to include personal care products companies. Based on their analysis, publicly-traded companies A and B stand out as choices. Company A has a beta value of 0.65 while company B has a beta value of 1.10. They decide to invest in Company A. What objective of their investment policy did they use to make their decision?

Options:

A.

Safety

B.

Liquidity

C.

Exposure horizon

D.

Risk/return trade-off

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Questions 89

A portfolio manager would like to purchase U.S. 50 million of 10-year notes 3 months from now, but has heard news that the Federal Reserve will start a purchasing program of longer term treasuries that will include 10-year notes. The purchase program would likely cause a lowering of market interest rates. The manager would also like to avoid having to use margin on a daily basis. To remove the price risk that may be associated with the Federal Reserve purchasing program, the portfolio manager would MOST LIKELY enter into an:

Options:

A.

interest rate swap.

B.

interest rate collar.

C.

interest rate futures contract.

D.

interest rate forward contract.

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Questions 90

A bank's reserve requirement on demand deposits is 10%, and its earnings credit rate is 6%. If a company uses bank services amounting to $2,600 and has an excess of $550 in earnings credit, what is the average collected balance in the account based on a 30-day month?

Options:

A.

$123,921

B.

$461,889

C.

$585,810

D.

$709,731

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Questions 91

Which of the following services allows a bank to match checks presented for payment against company check issuance data?

Options:

A.

Payor bank services

B.

Check inquiry

C.

Positive pay

D.

High-order prefix

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Questions 92

Which of the following is a disadvantage of e-commerce?

Options:

A.

Reduced collection float

B.

Reduced disbursement float

C.

Reduced accounts receivable cycle

D.

Reduced inventory cycle

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Questions 93

Each of the following statements is true of both defined benefit plans and defined contribution plans EXCEPT:

Options:

A.

both of the plans are typically structured as single-employer plans and maintained for employees.

B.

both can be classified as overfunded or underfunded depending on the value of plan assets.

C.

the treasurer is normally responsible for overseeing the performance of the plan fund managers.

D.

the Pension Protection Act of 2006 includes significant changes to the rules governing both types of plans.

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Questions 94

The lockbox receipt records for one 30-day month are provided below. The opportunity costs are 10%.

CTP Question 94

What is the annual cost of float rounded to the nearest dollar?

Options:

A.

$167

B.

$385

C.

$417

D.

$500

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Questions 95

Included in the CAMELS rating system for financial institutions are all of the following EXCEPT:

Options:

A.

credit rating.

B.

earnings.

C.

asset quality.

D.

liquidity.

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Questions 96

If a company’s pension plan offered its executives the right to contribute a greater percentage of their salary to the plan than the percentage offered to other employees, it would be at risk of violating the ERISA nondiscrimination rule related to what?

Options:

A.

Executives’ benefits

B.

Salaried employees

C.

Highly compensated employees

D.

Fiduciary standards

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Questions 97

ACCOUNTS RECEIVABLE AT THE END OF MARCH

CTP Question 97

On the basis of the accounts receivable balance pattern above and April sales of $600, the cash flow forecast for April is:

Options:

A.

$440.

B.

$715.

C.

$875.

D.

$925.

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Questions 98

Which of the following should NOT be a consideration when setting an optimal dividend policy?

Options:

A.

Ability to raise other forms of capital

B.

Long-term need for capital expansion

C.

Short-term profit projection

D.

Target capital structure

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Questions 99

Which of the following types of payment transactions requires the authorization of both the initiating and the receiving party?

Options:

A.

A multiple drawee check

B.

A drawdown wire

C.

A depository transfer check

D.

A non-repetitive wire

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Questions 100

Which of the following is NOT one of the three goals of a disbursement system?

Options:

A.

Bank relationship management

B.

Information access

C.

Fraud prevention

D.

Centralize payments

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Questions 101

The year-end income statement and balance sheet accounts for a company as of December 31, Year 1 are shown in the Exhibit.

If no changes occurred in the current asset and current liability account balances from the beginning of the period, except for cash, what was the net cash flow from operations for Year 1?

Options:

A.

$350,000

B.

$365,000

C.

$390,000

D.

$400,000

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Questions 102

All of the following staff would be involved in the evaluation of an outsourced accounts payable solution EXCEPT:

Options:

A.

an internal auditor.

B.

a treasurer.

C.

a controller.

D.

a credit manager.

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Questions 103

Check MICR line information includes which of the following?

I. Bank of deposit identification number

II. Payee bank identification number

III. Federal Reserve bank code

IV. Payor's account number

Options:

A.

I only

B.

III and IV only

C.

II, III, and IV only

D.

I, II, III, and IV

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Questions 104

Which of the following is a common method for assigning float on a check deposited to a non-US bank account?

Options:

A.

Proof of deposit

B.

Company sample

C.

Value dating

D.

Fractional availability

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Questions 105

A company has a $2 million line of credit requiring a 5% compensating balance on usage. For the next year, the company projects a usage of 75% and a 10.375% interest rate. If the balance requirement is eliminated, by how many basis points will the company's effective interest rate be reduced?

Options:

A.

18

B.

30

C.

55

D.

74

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Questions 106

A company that is issuing a new class of stock would use the services of a(n):

Options:

A.

retail brokerage.

B.

portfolio manager.

C.

industrial credit company.

D.

investment brokerage firm.

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Questions 107

A good credit rating has which of the following effects on debt?

I. Improved marketability

II. Decreased cost of funds

III. Decreased maturity

IV. Increased dealer fees

Options:

A.

I and IV

B.

I and II

C.

II and III

D.

I, II, and III

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Questions 108

Which of the following is a typical overnight use of excess cash?

Options:

A.

Entering into a repurchase agreement

B.

Investing in Dutch auction preferred stock

C.

Purchasing a Treasury bill

D.

Purchasing a certificate of deposit

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Questions 109

Which two of the following are necessary to calculate average collected balances?

I. Deposit float

II. Reserve requirements

III. Ledger balance

IV. Earnings credit rate

Options:

A.

I and II

B.

I and III

C.

II and IV

D.

III and IV

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Questions 110

A merchant presents 2 different batches of credit card transactions for processing, each batch has the same dollar value and number of transactions, but the fees are different. Which of the following explains why?

Options:

A.

Use of a different terminal

B.

Goods or services sold

C.

Type of card accepted

D.

Time of batch closure

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Questions 111

Trade terms are renegotiated under e-commerce in order to:

Options:

A.

balance the payment.

B.

neutralize the float.

C.

quantify the savings.

D.

improve the seller's availability.

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Questions 112

Which of the following is NOT an operational risk?

Options:

A.

Workers’ compensation risk

B.

Fidelity risk

C.

Surety risk

D.

Currency risk

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Questions 113

The measurement of the significance of any loss exposure depends on:

Options:

A.

loss type and loss prevention.

B.

loss response and loss control.

C.

loss probability and loss history.

D.

loss frequency and loss type.

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Questions 114

A company determines that no combination of risk control or financing techniques will produce an adequate, risk-adjusted rate of return on manufacturing a new product. It decides to discontinue the product line. This is an example of:

Options:

A.

capacity error.

B.

indemnification.

C.

exposure avoidance.

D.

consequential damages.

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Questions 115

Which of the following is NOT a method multinational companies (MNC) use to repatriate capital?

Options:

A.

Internal factoring

B.

Dividends

C.

Transfer pricing

D.

Management fees

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Questions 116

A company has negotiated a credit facility with the following terms:

  • $5,000,000 line of credit
  • $3,000,000 average borrowing
  • 30 basis point commitment fee on unused portion of line
  • Interest rate on advances is 1-month LIBOR plus 4%
  • 1-month LIBOR is currently 2%
  • Compensating balance requirement of 20% on the outstanding borrowings

What is the effective annual borrowing rate for the line of credit?

Options:

A.

6.0%

B.

6.2%

C.

7.8%

D.

9.3%

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Questions 117

Which of the following is true when a company purchases goods using trade credit from suppliers?

Options:

A.

The buyer incurs no added cost if it pays on time.

B.

The supplier will charge interest to the buyer.

C.

The buyer should record this as a long-term liability.

D.

The supplier places a lien on the goods sold until payment.

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Questions 118

Treasury policies should be approved by the:

Options:

A.

audit committee.

B.

controller.

C.

board of directors.

D.

external auditors.

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Questions 119

A national retailer’s cash management system includes a field deposit system using multiple banks. To limit the impact of a failure of one of these banks, a cash manager should:

Options:

A.

consolidate all accounts at one bank.

B.

use wire transfers for concentration.

C.

monitor each bank’s credit policies.

D.

concentrate cash on a regular basis.

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Questions 120

A treasurer overhears several employees talking about selling their company stock before a pending deal impacts the stock negatively. What action should the treasurer take to control this behavior in the future?

Options:

A.

Report the employees to the SEC.

B.

Provide training on ethics and code of conduct.

C.

Contact the investor relations department.

D.

Contact the internal and external auditors.

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Questions 121

A construction company just received a notification from its bank advising it of an altered dollar amount on a check. This notification is MOST LIKELY the result of:

Options:

A.

the use of positive pay.

B.

the use of controlled disbursement.

C.

automated reconciliation services.

D.

reverse positive pay.

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Questions 122

Company M operates a grocery distribution business on Main Street. As part of its business continuity plan, Company M intends to purchase insurance to cover the facility lease for its Main Street warehouse in the event it cannot operate for a period of time. What type of coverage should Company M purchase?

Options:

A.

Cost reimbursement insurance

B.

Business interruption insurance

C.

General liability insurance

D.

Fiduciary insurance

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Questions 123

ABC Company offers trade terms of 2/10 NET 30. For several reasons, ABC has decided to eliminate the requirement for a letter of credit from one of its customers. If ABC puts the customer on open book credit, what is the MOST LIKELY outcome?

Options:

A.

ABC’s credit rating will suffer.

B.

The customer’s working capital has deteriorated.

C.

ABC’s working capital is unchanged.

D.

The customer’s cost of borrowing will increase.

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Questions 124

The Sarbanes-Oxley Act of 2002 requires that a public company’s financial statements be certified by the company’s:

Options:

A.

chief financial officer and corporate secretary.

B.

chief financial officer and corporate controller.

C.

chief financial officer and chief executive officer.

D.

chief financial officer and chief operating officer.

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Questions 125

Multinational corporations repatriate funds from foreign operations through which of the following?

Options:

A.

Dividends and management fees

B.

Reinvoicing and factoring

C.

Multilateral netting system

D.

Letters of credit and documentary collections

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Questions 126

In this situation, the net earnings credit amount for the month would show:

CTP Question 126

Options:

A.

a deficiency of $1,725.

B.

an excess of $1,425.

C.

an excess of $1,850.

D.

an excess of $2,100.

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Questions 127

ABC Company, a U.S. company, has an overseas customer, XYZ Inc., who wants to purchase $3.1 million of equipment from ABC Co. XYZ Inc. wants to structure payment by paying 10% at time of order, 40% at time of shipment and the remaining 50% at time of receipt of the equipment. The last time XYZ Inc. purchased equipment from ABC Co. they never paid the final 50%, claiming the equipment did not work properly. Which of the following can ABC Co. use for this transaction to guarantee payment?

Options:

A.

Installment credit

B.

Documentary collection

C.

Performance guarantee

D.

Commercial letter of credit

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Questions 128

An L/C in favor of a U.S. exporter is issued by a bank in an emerging-market country, and it is confirmed by the exporter’s bank. What risk is reduced for the U.S. exporter?

Options:

A.

Credit risk

B.

Currency risk

C.

Re-investment risk

D.

Valuation risk

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Questions 129

All of the following statements are true about loan participations EXCEPT:

Options:

A.

more than one lender commits to them.

B.

loan advances and payments are divided among the participants.

C.

loan servicing is provided by the lead institution.

D.

they are traded in the secondary market.

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Questions 130

A company that has a nationwide workforce may use which of the following methods for disbursing payroll to minimize the number of bank accounts?

I. Payable through draft

II. Multiple drawee checks

III. ACH credit transfers

Options:

A.

I only

B.

II only

C.

I and III only

D.

II and III only

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Questions 131

A retail lockbox system is characterized by which of the following?

I. An emphasis on processing cost

II. Detailed information on discounts taken

III. Small-dollar amounts per invoice

IV. Multiple invoices per payment

Options:

A.

I and II only

B.

I and III only

C.

I, II, and III only

D.

II, III, and IV only

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Questions 132

A currency is said to trade at a discount if it is worth:

Options:

A.

less than its face value.

B.

less in the forward market than in the spot market.

C.

less in the futures market than in the forward market.

D.

less today than one year hence.

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Questions 133

A cash manager should use which of the following techniques to measure the differences among cash flows with different timings and amounts?

Options:

A.

Present value calculations

B.

Yield curve analysis

C.

Return on investment

D.

Exponential smoothing

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Questions 134

Which of the following will exempt commercial paper from SEC registration?

I. A maturity of fewer than 270 days

II. A rating grade of A-1 or P-1

III. Distribution through a licensed dealer

IV. Backing by a U.S. bank letter of credit

Options:

A.

I only

B.

IV only

C.

I and II only

D.

II, III, and IV only

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Questions 135

Which of the following investment instruments would provide a company with the greatest liquidity and least risk?

Options:

A.

Certificate of deposit

B.

Commercial paper

C.

Certificate of participation

D.

Treasury bill

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Questions 136

The purpose of cash letters is to:

Options:

A.

arrange currency deliveries from the Fed.

B.

request payment under standby letters of credit.

C.

collect merchant charge-card sales.

D.

facilitate the clearing of paper checks.

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Questions 137

Given a corporate tax rate of 34%, a tax-exempt yield of 7% is equivalent to a taxable yield of:

Options:

A.

4.6%.

B.

7.0%.

C.

10.6%.

D.

34.0%.

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Questions 138

A grocery store chain would be likely to use all of the following services EXCEPT:

Options:

A.

armored car.

B.

cash vault.

C.

retail lockbox.

D.

debit card.

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Questions 139

Which of the following is responsible for examining national banks?

Options:

A.

The Federal Reserve

B.

The Federal Deposit Insurance Corporation

C.

The Office of the Comptroller of the Currency

D.

The Securities and Exchange Commission

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Exam Code: CTP
Exam Name: Certified Treasury Professional
Last Update: Feb 26, 2024
Questions: 932

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