Question Tag: Treasury bills

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  • 20 Marks

MFS – JUL 2020 – L2 – Q5 – Liquidity of Assets and Interest Rate Swaps

Discuss the liquidity of specific assets and explain how companies use interest rate swaps for managing interest rate risk.

a) Discuss the degree of liquidity of the following assets

i. Treasury bills

ii. Gilt-edged stock

iii. Bank notes

iv. Certificates of deposit

b) Explain how a company may use interest rate swap as a means of managing interest rate risk.

[Total Marks: 20]

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  • 20 Marks

MFS – OCT 2022 – L2 – Q2 – Benefits of Financial Intermediation and Central Bank Lending

Outline benefits of financial intermediation and assess a scenario on central bank lending practices.

a) Outline the main benefits of financial intermediation. (15 Marks)

b) Assuming you are a member of a panel set up to discuss a press release of the Central Bank. In the release, it was stated that the Monetary Policy Rate was maintained at 25% and Treasury bill rate was 13%. One panel member alluded to rumours circulating that the Central Bank wanted to avoid the criticism of over-lending to the Government, so it lent to Universal Banks and Government in turn, borrowed from the Universal Banks. How do you assess this information? (5 Marks)

[Total: 20 Marks]

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  • 20 Marks

MCBFI – APR 2023 – L4 – Q5 – Investor Attitude to Risk, Risk Reduction, and Mutual Funds vs Shares

Assess investors' attitude to risk, strategies to reduce risk, and distinguish between mutual funds and shares amid high T-bill rates and bond turmoil in Ghana.

The current macro-economic policies have really undermined the principles covering Government Securities and its associated risks. The relatively high Treasury Bills rates have attracted massive interests by prospective investors whilst the Bond Market is in turmoil. The Bank of Ghana is receiving massive over subscription week on week by investors in Treasury Bills, in most recent Weekly Auctions.

Required:

(a) Assess the attitude to risk by investors. (6 marks)

(b) What can the investors do to avoid or reduce risk? (6 marks)

(c) Clearly distinguish between Mutual Funds and Shares. (8 marks) (Total: 20 marks)

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  • 20 Marks

ITF – APR 2023 – L3 – Q2 – Eagle Eyes Limited Investment Strategy

Discuss and illustrate the validity of Eagle Eyes Limited's strategy to disinvest US dollar fixed deposit, convert to GHS for Treasury bills, and hedge with a forward contract.

Eagle Eyes Limited (EEL), took advantage of the business prospects under the National Pensions Regulatory Authority (NPRA) and registered as a Fund Manager/Custodian under the law. They chose the High Street branch of your bank and have since proved to be very wealthy customers. Today, you are in the seat managing affairs of the branch. They called on you to discuss movements in their investment as a new strategy to manage their business under the current economic challenges the country is experiencing.

They intend to disinvest their US dollar fixed deposit of US$950,000 which is earning 13.98 percent per annum, sell to your bank for local currency and take advantage of rising Government Treasury bill rates which has seen a major increase on the back of the prime rate. Being much aware of the financial terrain, EEL is hedging its risk through a six month forward contract as it still holds some US dollar obligations in its books.

Your bank’s borrowing rates are as follow:

US dollar 6 months fixed 13.98% p.a.
GH cedis 6 months Treasury Bill 27.35% p.a.

On the foreign exchange market, your bank is quoting the follow rates for today:

Spot 9.8750
6 months forward 0.7125 cedis discount

Required: a. In bullet point form, indicate what you would discuss with your customer regarding their investment re-pricing plans. [10 marks] b. Use the spot and forward margins and interest rates shown above to illustrate your answer. Indicate the validity or otherwise of the strategy of EEL. [10 marks]

[Total Marks 20]

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  • 15 Marks

FM – Nov 2021 – L3 – Q6 – Portfolio Management

Analyze the risk profile of Bettaluck plc's short-term equity portfolio and assess investment adjustments based on market returns and financial strategy.

Bettaluck plc is experiencing a substantial net cash inflow, which has been temporarily invested in a short-term equity portfolio. This portfolio consists of investments in four Nigerian listed companies. The funds are intended to meet tax obligations, dividend payments, and future capital expenditures in several months.

Portfolio Details:

Required:

a. Based on the data provided, calculate the risk (i.e., Beta) of Bettaluck’s short-term investment portfolio relative to the market. (4 Marks)

b. Recommend whether the composition of Bettaluck’s short-term investment portfolio should be adjusted. Provide reasons for your recommendation, including relevant calculations. (6 Marks)

c. Discuss the factors a financial manager should consider when investing in marketable securities. (5 Marks)

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  • 20 Marks

CSME – May 2017 – L2 – SB – Q3 – Risk Management and Corporate Strategy

Explain business risk to a conservative investor and discuss strategies for risk control and monitoring.

Mallam Danladi is a civil servant who has won a sum of one hundred million Naira in a lottery. Being a very conservative person who is averse to risks, Mallam Danladi is contemplating putting the money in a fixed deposit account at an interest rate of 14% per annum or into treasury bills at an interest rate of 18.5% per annum. These two options are considered to be virtually risk-free. Mr. Madoff, a risk consultant, advised him to invest in the production of shea butter, coconut oil, and black soap, with a promise of 52% profit per annum. In an attempt to convince Mallam Danladi to invest in the production of these items, Mr. Madoff tried to educate him on the nature of risks and how to effectively monitor and control them in ways that will ensure that business remains highly profitable.

Required:

a. Explain briefly the nature of risk in business to Mallam Danladi. (2½ Marks)

b. Discuss FOUR distinct means of controlling business risk. (10 Marks)

c. Explain briefly the purpose of monitoring risks in business. (3 Marks)

d. Discuss THREE ways of monitoring risks in business. (4½ Marks)

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  • 10 Marks

PSAF – Nov 2020 – L2 – Q3b – Public Sector Audit

Discuss five domestic borrowing instruments used by the government to raise capital.

There are various instruments that can be employed for the purpose of raising capital within the domestic economy by government.

Required:
Discuss five of these instruments.

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  • 1 Marks

BMF – MAY 2015 – L1 – SA – Q18 – Basics of Business Finance and Financial Markets

Identifying which option is not a financial instrument in the money market.

Which of these is NOT a financial instrument traded in the money market?

A. Treasury Bills
B. Call money
C. Development stock
D. Stabilization securities
E. Bill Finance scheme

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  • 1 Marks

BMF – May 2022 – L1 – SA – Q18 – Basics of Business Finance and Financial Markets

Identifying the correct market for treasury bills.

The market for treasury bills is called
A. Money market
B. Discount market
C. Financial system
D. Capital market
E. Intermediation market

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  • 1 Marks

BMF – Nov 2019 – L1 – SA – Q16 – Basics of Business Finance and Financial Markets

Identifying the market where Treasury bills are traded

The market for Treasury bills is known as the:
A. Money market
B. Discount market
C. Financial system
D. Financial market
E. Intermediation market

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  • 20 Marks

MFS – JUL 2020 – L2 – Q5 – Liquidity of Assets and Interest Rate Swaps

Discuss the liquidity of specific assets and explain how companies use interest rate swaps for managing interest rate risk.

a) Discuss the degree of liquidity of the following assets

i. Treasury bills

ii. Gilt-edged stock

iii. Bank notes

iv. Certificates of deposit

b) Explain how a company may use interest rate swap as a means of managing interest rate risk.

[Total Marks: 20]

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  • 20 Marks

MFS – OCT 2022 – L2 – Q2 – Benefits of Financial Intermediation and Central Bank Lending

Outline benefits of financial intermediation and assess a scenario on central bank lending practices.

a) Outline the main benefits of financial intermediation. (15 Marks)

b) Assuming you are a member of a panel set up to discuss a press release of the Central Bank. In the release, it was stated that the Monetary Policy Rate was maintained at 25% and Treasury bill rate was 13%. One panel member alluded to rumours circulating that the Central Bank wanted to avoid the criticism of over-lending to the Government, so it lent to Universal Banks and Government in turn, borrowed from the Universal Banks. How do you assess this information? (5 Marks)

[Total: 20 Marks]

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  • 20 Marks

MCBFI – APR 2023 – L4 – Q5 – Investor Attitude to Risk, Risk Reduction, and Mutual Funds vs Shares

Assess investors' attitude to risk, strategies to reduce risk, and distinguish between mutual funds and shares amid high T-bill rates and bond turmoil in Ghana.

The current macro-economic policies have really undermined the principles covering Government Securities and its associated risks. The relatively high Treasury Bills rates have attracted massive interests by prospective investors whilst the Bond Market is in turmoil. The Bank of Ghana is receiving massive over subscription week on week by investors in Treasury Bills, in most recent Weekly Auctions.

Required:

(a) Assess the attitude to risk by investors. (6 marks)

(b) What can the investors do to avoid or reduce risk? (6 marks)

(c) Clearly distinguish between Mutual Funds and Shares. (8 marks) (Total: 20 marks)

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  • 20 Marks

ITF – APR 2023 – L3 – Q2 – Eagle Eyes Limited Investment Strategy

Discuss and illustrate the validity of Eagle Eyes Limited's strategy to disinvest US dollar fixed deposit, convert to GHS for Treasury bills, and hedge with a forward contract.

Eagle Eyes Limited (EEL), took advantage of the business prospects under the National Pensions Regulatory Authority (NPRA) and registered as a Fund Manager/Custodian under the law. They chose the High Street branch of your bank and have since proved to be very wealthy customers. Today, you are in the seat managing affairs of the branch. They called on you to discuss movements in their investment as a new strategy to manage their business under the current economic challenges the country is experiencing.

They intend to disinvest their US dollar fixed deposit of US$950,000 which is earning 13.98 percent per annum, sell to your bank for local currency and take advantage of rising Government Treasury bill rates which has seen a major increase on the back of the prime rate. Being much aware of the financial terrain, EEL is hedging its risk through a six month forward contract as it still holds some US dollar obligations in its books.

Your bank’s borrowing rates are as follow:

US dollar 6 months fixed 13.98% p.a.
GH cedis 6 months Treasury Bill 27.35% p.a.

On the foreign exchange market, your bank is quoting the follow rates for today:

Spot 9.8750
6 months forward 0.7125 cedis discount

Required: a. In bullet point form, indicate what you would discuss with your customer regarding their investment re-pricing plans. [10 marks] b. Use the spot and forward margins and interest rates shown above to illustrate your answer. Indicate the validity or otherwise of the strategy of EEL. [10 marks]

[Total Marks 20]

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  • 15 Marks

FM – Nov 2021 – L3 – Q6 – Portfolio Management

Analyze the risk profile of Bettaluck plc's short-term equity portfolio and assess investment adjustments based on market returns and financial strategy.

Bettaluck plc is experiencing a substantial net cash inflow, which has been temporarily invested in a short-term equity portfolio. This portfolio consists of investments in four Nigerian listed companies. The funds are intended to meet tax obligations, dividend payments, and future capital expenditures in several months.

Portfolio Details:

Required:

a. Based on the data provided, calculate the risk (i.e., Beta) of Bettaluck’s short-term investment portfolio relative to the market. (4 Marks)

b. Recommend whether the composition of Bettaluck’s short-term investment portfolio should be adjusted. Provide reasons for your recommendation, including relevant calculations. (6 Marks)

c. Discuss the factors a financial manager should consider when investing in marketable securities. (5 Marks)

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  • 20 Marks

CSME – May 2017 – L2 – SB – Q3 – Risk Management and Corporate Strategy

Explain business risk to a conservative investor and discuss strategies for risk control and monitoring.

Mallam Danladi is a civil servant who has won a sum of one hundred million Naira in a lottery. Being a very conservative person who is averse to risks, Mallam Danladi is contemplating putting the money in a fixed deposit account at an interest rate of 14% per annum or into treasury bills at an interest rate of 18.5% per annum. These two options are considered to be virtually risk-free. Mr. Madoff, a risk consultant, advised him to invest in the production of shea butter, coconut oil, and black soap, with a promise of 52% profit per annum. In an attempt to convince Mallam Danladi to invest in the production of these items, Mr. Madoff tried to educate him on the nature of risks and how to effectively monitor and control them in ways that will ensure that business remains highly profitable.

Required:

a. Explain briefly the nature of risk in business to Mallam Danladi. (2½ Marks)

b. Discuss FOUR distinct means of controlling business risk. (10 Marks)

c. Explain briefly the purpose of monitoring risks in business. (3 Marks)

d. Discuss THREE ways of monitoring risks in business. (4½ Marks)

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  • 10 Marks

PSAF – Nov 2020 – L2 – Q3b – Public Sector Audit

Discuss five domestic borrowing instruments used by the government to raise capital.

There are various instruments that can be employed for the purpose of raising capital within the domestic economy by government.

Required:
Discuss five of these instruments.

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  • 1 Marks

BMF – MAY 2015 – L1 – SA – Q18 – Basics of Business Finance and Financial Markets

Identifying which option is not a financial instrument in the money market.

Which of these is NOT a financial instrument traded in the money market?

A. Treasury Bills
B. Call money
C. Development stock
D. Stabilization securities
E. Bill Finance scheme

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You're reporting an error for "BMF – MAY 2015 – L1 – SA – Q18 – Basics of Business Finance and Financial Markets"

  • 1 Marks

BMF – May 2022 – L1 – SA – Q18 – Basics of Business Finance and Financial Markets

Identifying the correct market for treasury bills.

The market for treasury bills is called
A. Money market
B. Discount market
C. Financial system
D. Capital market
E. Intermediation market

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  • 1 Marks

BMF – Nov 2019 – L1 – SA – Q16 – Basics of Business Finance and Financial Markets

Identifying the market where Treasury bills are traded

The market for Treasury bills is known as the:
A. Money market
B. Discount market
C. Financial system
D. Financial market
E. Intermediation market

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