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Chapter 9: Cash and Marketable Securities Management

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1. Marketable securities are primarily

short-term debt instruments.

short-term equity securities.

long-term debt instruments.

long-term equity securities.

2. Time consumed in clearing a check through the banking system.

Processing float

Deposit float

Collection float

Availability float

3. Commercial paper is essentially

another term for a junk bond.

a short-term unsecured corporate IOU.

an intermediate-term corporate bond.

a certificate that may be exchanged for a share of common stock at a specified future
date.

4. Concentration banking

increases idle balances.

moves excess funds from a concentration bank to regional banks.

is less important during periods of rising interest rates.

improves control over corporate cash.

5. Which would be an appropriate investment for temporarily idle corporate cash that will be used to pay quarterly dividends three months from now?

A long-term Aaa-rated corporate bond with a current annual yield of 9.4 percent.

A 30-year Treasury bond with a current annual yield of 8.7 percent.

Ninety-day commercial paper with a current annual yield of 6.2 percent.

Common stock that has been appreciating in price 8 percent annually, on average, and
paying a quarterly dividend that is the equivalent of a 5 percent annual yield.

6. Which of the following marketable securities is the obligation of a commercial bank?

Commercial paper

Negotiable certificate of deposit

Repurchase agreement

T-bills

7. The movement of business data electronically in a structured, computer-readable format.

EFT

EDI

SWIFT

CHIPS

8. That portion of a firm's total marketable securities portfolio held to take care of probable deficiencies in the firm's cash account.

Free cash segment

Controllable cash segment

Ready cash segment

None of the above

9. The most basic requirement for a firm's marketable securities.

Safety

Yield

Marketability

New York.

10. A non-negotiable check payable to a company account at a concentration bank

Payable through draft (PTD)

Depository transfer check (DTC)

ACH transfer

Repo

11. According to the Bond Equivalent Yield (BEY) method, the yield on a $1,000, 13-week US Treasury bill purchased for $960 would be closest to .

16.0 percent

16.7 percent

17.0 percent

17.8 percent

The following items are NEW to the 13th edition.

12. US Treasury bills are now sold in minimum amounts of and multiples of above the minimum.

$10,000; $10,000

$10,000; $1,000

$1,000; $1,000

$1,000; $100

$100; $100

13. Accounts receivable conversion (a.k.a., check conversion) is the conversion of a paper check to .

an electronic check image

a "substitute check"

an ACH debit transaction

a foreign currency

14. The US Federal National Mortgage Association (FNMA, "Fannie Mae") and the US Federal Home Loan Mortgage Corporation (FHLMC, "Freddie Mac") are . Interest and principal on debt securities that they issue explicity guaranteed by the US government.

federal agencies; are

federal agencies; are not

government sponsored entities (GSEs); are

government sponsored enterprises (GSEs); are not

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