CTP Online Practice Questions and Answers

One of the PRIMARY ways the Fed addresses systemic risk is by:

A. assigning passwords and PINs to identify authorized users of its Fedwire system.

B. establishing intra-day credit limits for ACH originators.

C. setting minimum reserve requirements for its member banks.

D. setting daylight overdraft limits for its member banks.

Which of the following is a KEY operational advantage of short-term debt?

A. It can be arranged quickly and easily.

B. It improves the current ratio for debt covenant and compliance purposes.

C. It reduces the risk of interest rate fluctuation and lowers interest expense.

D. It improves the overall liquidity position and reduces risk.

An analyst is performing a lease versus buy analysis on a corporate jet. In the evaluation, a cost is relevant if it is:

A. tied to inflation.

B. different in each scenario.

C. considered a sunk cost.

D. unlikely to be incurred.

Which of the following types of risk would an investor who does NOT receive payments on a security under the original terms be subject to?

A. Price

B. Credit

C. Asset liquidity

D. Foreign exchange

During a company's cash flow analysis review it discovers that for every 10 new customers it gains, there is an increase of 2% in its float costs associated with the payment methods it offers. If the company pursues faster collection methods for payments, resulting in greater availability of surplus cash with a correlating decrease in the need to issue commercial paper, what risk will the company mitigate?

A. Settlement

B. Disbursement

C. Liquidity

D. Float

A small import/export company, XYZ Company, has recently set up an account with a German firm. The contract between the companies states that XYZ is to be paid as soon as all documents are in order showing that the transaction terms have been met. Which of the following forms of payment drafts would be MOST appropriate for XYZ?

A. Payable through

B. Sight

C. Time

D. Preauthorized

All of the following are reasons to use a confirmed irrevocable letter of credit EXCEPT concern about:

A. the buyer's ability to pay.

B. the ability to receive cross-border payments.

C. foreign currency exposure.

D. the stability of the buyer's bank.

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?

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.

A farmer who plans to sell his/her corn crop in three months would benefit MOST from which of the following?

A. A long futures contract and falling prices

B. A long futures contract and steady prices

C. A short futures contract and rising prices

D. A short futures contract and falling prices

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 upondelivery in 15 days. The

Canadian dollar is forecasted to weaken within this period.

This is an example ofA.

A. forward transaction at a premium.

B. forward transaction at a discount.

C. spot transaction at a premium.

D. spot transaction at a discount.