Certified Treasury Professional Exam Short-Term Investing and Borrowing

Question 1

Which money market instrument is an unsecured, short-term debt obligation issued by highly rated corporations to fund immediate operating needs?

Accepted Answer

Commercial paper

Answer

Commercial paper is an unsecured promissory note issued by corporations with strong credit ratings, typically maturing in 1 to 270 days.

Question 2

A repurchase agreement (repo) is best described as:

Accepted Answer

A sale of securities with an agreement to repurchase them at a higher price

Answer

A repo is a collateralized short-term borrowing where one party sells securities and agrees to buy them back at a slightly higher price, representing the implied interest.

Question 3

The SEC Rule 2a-7 primarily governs which short-term investment vehicle?

Accepted Answer

Money market mutual funds

Answer

SEC Rule 2a-7 sets quality, maturity, liquidity, and diversification standards for money market mutual funds to maintain stable NAV.

Question 4

Which metric measures the weighted average time until a money market fund's portfolio securities mature or are repriced, reflecting interest rate sensitivity?

Accepted Answer

Weighted average maturity (WAM)

Answer

WAM measures the dollar-weighted average maturity of all portfolio holdings, indicating how quickly the fund's yield adjusts to changing interest rates.

Question 5

A treasury manager investing in Treasury bills at a bank discount yield of 4.5% for 91 days would calculate the bond-equivalent yield (BEY) using a day count of:

Accepted Answer

365 days

Answer

The bond-equivalent yield converts the discount yield to a 365-day basis, making T-bill yields comparable to coupon-bearing bonds.

Certified Treasury Professional Exam Practice Test

Certified Treasury Professional Exam Practice Test

Certified Treasury Professional Exam Short-Term Investing and Borrowing