MODULE 3: CHAPTER 9: Investment Management

1. Which of the following is considered the most important investment criterion for treasury managers?

• A. Marketability

• B. Yield

• C. Safety of the Principal

• D. Liquidity

• E. Maturity

2. Short-term investments are generally defined as those maturing within:

• A. 6 months

• B. 1 year

• C. 2 years

• D. 3 years

• E. 5 years

3. Why are blue-chip companies preferred when investing in commercial paper?

• A. They provide the highest yield

• B. They are backed by government guarantees

• C. They minimize default risk

• D. They are easily marketable

• E. They mature in over a year

4. A certificate of deposit (CD) is generally considered safer than commercial paper because:

• A. It is issued by the government

• B. Banks are more closely regulated and insured

• C. It matures within 30 days

• D. It carries higher yield

• E. It is traded in secondary markets

5. Which investment strategy involves matching investment maturity dates to cash flow requirements?

• A. Laddering Strategy

• B. Matching Strategy

• C. Earnings Credit Strategy

• D. Riding the Yield Curve

• E. Tranched Cash Flow Strategy

6. In a laddering strategy, a treasurer:

• A. Invests all cash in the shortest-term instrument

• B. Diversifies investments across different maturities

• C. Only invests in U.S. Treasury bills

• D. Relies on speculative interest rate predictions

• E. Matches cash flow to a single maturity date

7. The “riding the yield curve” strategy relies on:

• A. Government guarantees for principal safety

• B. Selling longer-term securities before maturity to profit from interest rate differences

• C. Investing in highly liquid assets only

• D. Using only short-term commercial paper

• E. Matching cash flow to maturity dates

8. Which tranche in the tranched cash flow strategy focuses on very high liquidity and minimal risk?

• A. Short-term tranche

• B. Medium-term tranche

• C. Long-term tranche

• D. Speculative tranche

• E. Credit tranche

9. Which of the following is true about the U.S. Treasury issuances?

• A. They are highly risky investments

• B. They have no secondary market

• C. They are considered risk-free with relatively lower yields

• D. They are only available to U.S. citizens

• E. They cannot be sold before maturity

10. A credit rating strategy in investment management involves:

• A. Investing only in government securities

• B. Buying debt, anticipating a credit rating upgrade

• C. Matching investments to cash flow needs

• D. Leaving idle balances in corporate bank accounts

• E. Investing all cash in short-term certificates of deposit