1.The least appropriate security for investing short-term excess cash balances would be:

A)   bank certificates of deposit.

B)   preferred stock.

C)   time deposits.

D)   a money market mutual fund.

2.An appropriate cash management strategy for a company that has a seasonally high need for cash prior to the holiday shopping season would least likely include:

A)   borrowing funds though a bank line of credit.

B)   investing in U.S. Treasury notes at other times of the year because they are highly liquid.

C)   allowing short-term securities to mature without reinvestment.

D)   issuing commercial paper to meet seasonal cash needs.

答案和详解如下：

1.The least appropriate security for investing short-term excess cash balances would be:

A)   bank certificates of deposit.

B)   preferred stock.

C)   time deposits.

D)   a money market mutual fund.

The correct answer was B)

While adjustable-rate preferred is an appropriate security for short-term investment of excess cash balances, other preferred shares are not. Bank certificates of deposit and time deposits can be for appropriately short periods. Money market funds are typically designed for investors with potential short-term liquidity needs.

2.An appropriate cash management strategy for a company that has a seasonally high need for cash prior to the holiday shopping season would least likely include:

A)   borrowing funds though a bank line of credit.

B)   investing in U.S. Treasury notes at other times of the year because they are highly liquid.

C)   allowing short-term securities to mature without reinvestment.

D)   issuing commercial paper to meet seasonal cash needs.

The correct answer was B)

Treasury notes have maturities between 2 and 10 years and, thus, have maturities longer than those of securities suitable for cash management. Allowing short-term securities to mature without reinvesting the cash generated would be one way to meet seasonal cash needs. Short-term bank borrowing or issuing commercial paper that can be paid off when holiday sales generate cash would be appropriate strategies for dealing with a predictable short-term need for cash.