AFP AFP Investment Portfolio Management 2

Question 1

Which of the following is a money market instrument eligible for corporate short-term investment portfolios?

Accepted Answer

Commercial paper

Answer

Commercial paper is a short-term unsecured debt instrument widely used in corporate investment portfolios for its liquidity.

Question 2

What is the AFP recommended minimum credit rating for commercial paper held in a corporate investment portfolio?

Accepted Answer

A-1/P-1

Answer

AFP guidelines recommend a minimum short-term rating of A-1 (S&P) or P-1 (Moody's) for commercial paper to ensure credit quality.

Question 3

What is the key difference between a separate account and a money market fund for corporate investment?

Accepted Answer

A separate account provides direct ownership of securities; a fund pools assets

Answer

In a separate account, the corporation directly owns each security, while a money market fund pools investor assets under a shared NAV.

Question 4

Which risk is most relevant when a corporate treasury invests in foreign currency-denominated securities?

Accepted Answer

Foreign exchange risk

Answer

Investing in foreign currency instruments exposes the portfolio to exchange rate fluctuations that can erode returns.

Question 5

What is a repurchase agreement (repo) primarily used for in corporate treasury investing?

Accepted Answer

Short-term collateralized borrowing or overnight investing

Answer

A repo allows a treasury to invest excess cash overnight with collateral backing, providing short-term liquidity management.

AFP - Association for Financial Professionals Practice Test