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Your Path to Success: How to Pass the AFP CTP Certified Treasury Professional Exam

Questions 101

XYZ Company is a fairly new and high growth company funded by venture capital. Which of the following performance measures is it MOST LIKELY to use?

Options:

A.

Economic value added

B.

Net present value

C.

Residual income

D.

Free cash flow

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Questions 102

The School of Cash Management is dealing with a large bank that has been highly rated by Moody’s and S&P. The School has a purchasing card program in place and is not using a highly secure student registration data base. Both the School and the bank have highly automated payment processes. Based on the automation factor, the School should be MOST concerned about which of the following types of fraud exposure?

Options:

A.

Wire fraud

B.

Payroll fraud

C.

ACH kiting fraud

D.

Credit card fraud

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Questions 103

An individual has just inherited several million dollars and has decided to purchase the stock of a telecommunications company to diversify his portfolio. Before purchasing shares, he would like to do some company-specific research to determine which company to select. Examples of the information the individual wishes to obtain are financial statements and disclosures, company organizational structure, code of conduct, pending litigation, and profiles of the board of directors. Who would be the BEST person to contact to obtain all this information?

Options:

A.

Corporate Treasurer

B.

General Counsel

C.

Enterprise Risk Manager

D.

Investor Relations Manager

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Questions 104

A North American service company has autonomous offices in different geographic regions each handling their own sales and accounts receivables deposits to local banks which primarily consist of checks. By implementing a lockbox collection system, what objective in its collection policy would it have met?

Options:

A.

Payment float

B.

Cost efficiency

C.

Segregation of duties

D.

Customer satisfaction

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Questions 105

A U.S. bank is actively trying to establish its operations in an emerging market country, but is not experiencing much success due to differences in the business culture. To gain some market share, an executive of the bank decides to give the son of a local dignitary a highly paid position in the organization. Furthermore, the dignitary is a person of interest on various terror watch lists. Sanctions can be placed on the bank because the executive did NOT establish compliance with which of the following?

Options:

A.

Bank Secrecy Act

B.

Anti-Money Laundering

C.

Foreign Corrupt Practices Act

D.

Office of Foreign Assets Control

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Questions 106

Customers of an electronic trading firm are experiencing problems with the online trading platform. The company IT department discovered that although display of market data is in the proper place, there are no tags being used to populate specific information in the necessary fields. The company is MOST LIKELY experiencing a problem with:

Options:

A.

Electronic Data Interchange (EDI).

B.

Extensible Markup Language (XML).

C.

Hypertext Markup Language (HTML).

D.

Public Key Infrastructure (PKI).

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Questions 107

CT Check Cashing routinely cashes payroll checks from JD Software. Someone presents a fraudulent check from JD Software to CT Check Cashing. The fraudulent item looks virtually identical to JD Software's regular payroll checks. CT Check Cashing pays the person cashing the check the amount for which it is issued. CT Check Cashing later discovers that the check was fraudulent and wants JD Software to reimburse them for the amount of the check. Which of the following statements is correct?

Options:

A.

Fraudulent endorsement has occurred and JD Software will not be held liable for this item.

B.

This item is payable through draft so JD Software will be liable to CT Check Cashing for the amount of the check.

C.

JD Software has a controlled disbursement account so CT Check Cashing will not have recourse against JD Software for this item.

D.

Positive pay is designed to reject the item, but JD Software may ultimately be held liable if CT Check Cashing is deemed to be a holder in due course.

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Questions 108

A consumer is presented with payment options from a merchant when making a purchase. The consumer does not wish to share any information that could be later used in identity theft or fraud, while the merchant requires guaranteed payments within 24 hours with no NSFs or declined payments. Which of the following options would suit both the consumer and the merchant?

Options:

A.

NACHA’s Secure Vault PaymentsTM

B.

Credit card payment

C.

Direct debit

D.

E-check

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Questions 109

MCA, Inc. upgraded the Treasury workstation that had been in place for two years and used data from that 24-month period to develop a new short-term forecast. A trend factor was applied to controlled disbursements of 97% on a month-by-month basis and the variance to actual disbursements is less than 1%. Which of the following model validation techniques was utilized?

Options:

A.

In-sample validation

B.

Documentation validation

C.

Ongoing validation

D.

Comparison validation

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Questions 110

The Cash Manager of ABC Logistics, Inc. sets a daily cash position by noon. All departments have been given an 11 a.m. cut-off for presenting wire requests and 2 p.m. for ACH requests. A wire request came in at 3:30 p.m. to make an insurance premium payment, in order to receive a discount. What liquidity reserve requirement is impacted?

Options:

A.

Regulatory

B.

Transaction

C.

Opportunistic

D.

Precautionary

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Questions 111

A U.S. financial institution expects to grow at an exponential rate to become one of the largest companies in the country. It wants to hire the best talent in the industry and is willing to pay excessive compensation. In order to achieve the high growth, it is planning on charging hidden fees on mortgages, credit cards etc. Further, it wants to engage in risky practices pertaining to over-the-counter derivatives, asset-backed securities and hedge funds. The financial institution has hired an outside law firm to determine if it is feasible to escape unwanted regulation and oversight from various government entities. Which of the following regulations prohibits the financial institution from engaging in the described practices?

Options:

A.

Gramm-Leach-Bliley Act

B.

The Dodd-Frank Act

C.

Sarbanes-Oxley Act

D.

USA Patriot Act

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Questions 112

A company has multiple wholly-owned subsidiaries that issue their own checks which are signed by head office staff. The company decides to move to electronic payments using their bank’s internet-based payment systems to reduce costs. Payments are now initiated by the subsidiaries. What element of the payment policy should be considered if the company still wants to maintain head office control over payments?

Options:

A.

Risk mitigation

B.

Objectives and scope

C.

Roles and responsibilities

D.

Performance measurement and reporting

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Questions 113

Company ABC is a restaurant chain that has enjoyed a surge in customers’ dining with not much of a profitability increase in the last couple of years. Following a bad restaurant review, customer traffic deteriorated with not much change in profitability. Which of the following BEST describes the cost structure of the company?

Options:

A.

Low variable costs

B.

Economies of scale

C.

Low financial leverage

D.

Low operating leverage

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Questions 114

XYZ Bank would like to conduct some foreign exchange transactions with JKL Bank. JKL isn’t the most liquid and could have some credit risk. XYZ Bank should suggest which of the following in order to eliminate risk?

Options:

A.

Pre-authorized draft

B.

Straight-through processing

C.

Forward rate contract

D.

Continuous Linked Settlement

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Questions 115

XYZ Company is interested in issuing a bond to finance a new venture opportunity. The new venture is not expected to generate any cash flow for several years. Because of this, XYZ Company would prefer to issue a bond that does not require interest payments. What type of bond should XYZ Company issue?

Options:

A.

Zero-coupon bond

B.

Municipal bond

C.

Tender option bond

D.

High-yield bond

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Questions 116

A call option for a company has an exercise price of $50. The stock is currently trading at $60. At maturity, what should an investor who paid $3 for the option do?

Options:

A.

Exercise the option and gain $7.

B.

Exercise the option and gain $10.

C.

Not exercise the option and lose $3.

D.

Not exercise the option and lose $13.

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Questions 117

The stock of a manufacturing company is priced so that its expected rate of return is below its required rate, as calculated by the Capital Asset Pricing Model (CAPM). Which of the following will occur in an efficient capital market?

Options:

A.

Buying pressure for the firm’s stock will drive the price up.

B.

Buying pressure for the firm’s stock will drive the price down.

C.

Selling pressure for the firm’s stock will drive the price up.

D.

Selling pressure for the firm’s stock will drive the price down.

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Questions 118

Company XYZ has determined that its weighted average cost of capital is 12.5%. The capital structure of the company is made up of 75% equity and 25% debt. The before-tax cost of debt is 10%. Given a tax rate of 34%, what is XYZ's cost of common stock?

Options:

A.

13.25%

B.

14.47%

C.

15.25%

D.

16.53%

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Questions 119

Which of the following instruments simplifies the paperwork connected with loans that have multiple advance features?

Options:

A.

Master note

B.

Banker's acceptance

C.

Indenture agreement

D.

Note purchase agreement

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Questions 120

The MOST common way that companies structure their treasury operations is as a:

Options:

A.

cost center.

B.

profit center.

C.

shared service center.

D.

in-house bank.

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