CTP7 Official (AFP)
Practice Exam Questions
Terms in this set (170)
Which of the following makes it possible for electronic 1) Single Euro Payments Area (SEPA)
payments within and across member countries to be
treated as if they were in-country funds transfers? The Single Euro Payments Area (SEPA), an initiative of the European Union, ensures that
electronic payments within the Eurozone are handled in a standardized and inexpensive
Single Euro Payments Area (SEPA) manner across all countries of the Eurozone. In effect, cross-border payments within the
International Bank Account Number (IBAN) SEPA boundaries are treated as if they were in-country rather
Bank Identifier Code (BIC) than cross-border payments.
Trans-European Automated Real-Time Gross
Settlement Express Transfer System (TARGET) For more information on this topic, please refer to Chapter 4, Topic 4.
TARGET2 payment system Question ID: CTP7-PT04.4-003
,A treasury professional has risk minimization as a
3) 3.10 Years
primary goal when selecting between several
potential projects. Using the limited data in the table
The payback period equals the number of years required to recover the initial
below, what is the payback period of the project that
investment. This measure is significant because 1) the faster the investment is repaid,
would exhibit the least risk?
the faster the funds can be invested in another opportunity and 2) investments with
short payback periods are considered to be less risky than those with longer
Year Project A Project B Project C
payback periods. Therefore, all other things being equal, the project with the
0 ($6,000,000) ($4,000,000) ($2,500,000)
shortest payback period is considered to be the least risky.
1 $1,500,000. $985,000. $0
To find the payback period, add up the amounts earned in each whole year until
2 $1,500,000. $985,000. $0
the remainder will be paid back in the following year. For that year, divide the
3 $1,750,000. $1,850,000. $2,100,000 remaining amount needing to be paid back by the total cash inflow that year to
4 $2,000,000. $1,850,000. $2,100,000 determine the portion of that year needed to pay back the initial investment. The
5 $2,000,000. $1,850,000. $8,100,000 payback period is calculated as the year that the initial amount will be paid back
plus this fractional amount of a year, which indicates at what point in this year the
Assume that all cash inflows occur evenly throughout initial investment will be repaid.
each year. Project A has a payback period of 3.63 years
Project B has a payback period of 3.10 years
1) 3.63 Years Project C has a payback period of 3.19 years
2) 2.25 Years Therefore, Project B, with a payback period of 3.10 years is the least risky project
3) 3.10 Years based solely on payback period.
4) 3.19 Years
Please refer to Chapter 9 topic 3 for more information on this topic.
Question ID: CTP7-PT09.3-007
What type of arrangement exists when creditors work
3) Informal bankruptcy
directly with management to establish a plan for
returning the organization to a sound financial
It is possible to perform a reorganization or a liquidation informally. An
basis, such as by restructuring some of the debt?
informal reorganization typically involves a firm that is fundamentally sound, but
is undergoing temporary financial difficulties. This is often done outside of
1) Freefall
bankruptcy in an agreed-upon write-off of some portion of the firm’s debts by
2) Pre-arranged
its creditors.The firm’s creditors work directly with management to establish a plan
3) Informal bankruptcy
for returning the firm to a sound financial basis. These plans usually involve some
4)Pre-packaged
restructuring of the firm’s debt, with creditors agreeing either to reduce or
reschedule debt payments in order to ensure the firm’s continuing operation.
For more information on this topic, please refer to Chapter 2, Topic
6. Question ID: CTP7-PT02.6-001
,A contractor's failure to complete a construction
4) Surety loss
project is considered which of the following types of
loss?
Effective risk management helps to control or prevent losses, and adequate
insurance helps to finance an organization’s recovery when a loss occurs. Events
1) Liability loss
resulting in a major loss generally disrupt an organization’s operating and
2) Property loss
financial plans. Losses occur for a variety of reasons, and as a result there are
3) Personnel loss
different types of policies designed to cover specific losses.Examples of
4)Surety loss
potential insured losses include:
Property loss (e.g., from fire or flood)
Business interruption or net income loss (e.g., due to the physical loss of a
building) Surety or breach of contract loss (e.g., a contractor's failure to
perform) Liability loss (e.g., from lawsuits by injured customers)
Personnel loss (e.g., loss of the president or other key employees)
Workers' compensation claims (e.g., from employee injury)
Cyber-risk loss (e.g., loss caused by data or network security
breach) Crime loss (e.g., from internal or external theft)
For more information on this topic, please refer to Chapter 16, Topic 5.
Question ID: CTP7-PT16.5-001
Which of the following statements is true of the Check
1) One party can provide a copy or an image of the check and never
Clearing for the 21st Century Act (Check 21)?
provide the original document to the other party
1) One party can provide a copy or an
The Check Clearing for the 21st Century Act provided the basis for
image of the check and never provide the original
electronic clearing of checks by allowing the substitution of a copy or image
document to the other party
of a check for the original document in the clearing process. The act was
2) The law makes the Fed service of
intended to speed and facilitate the clearing of checks—by eliminating the
check clearing available to all deposit-taking
need to exchange physical paper—and improve the overall efficiency of the
institutions
payment system.
3) It adds legal barriers to check
clearing for prevention of money
For more information on this topic, please refer to Chapter 4, Topic
laundering
5. Question ID: CTP7-PT04.5-001
4)It is an amendment to Regulation G
A key objective of successful treasury management
4) Ensuring liquidity
is
_____________.
The primary goal of treasury management is to effectively and efficiently manage
an organization’s cash and related financial assets (and liabilities) to support the
1) Increasing dividend income
achievement of the organization’s business objectives and strategy. This goal is
2) Indexing securities to the market
critical because all firms, no matter how successful, have a finite amount of liquid
3) Creating an investment policy
assets on hand during a given period of time.
4)Ensuring liquidity
For more information on this topic, please refer to Chapter 1, Topic
2. Question ID: CTP7-PT01.2-001
, For a company to be successful in selling overseas, it
2) Understand the unique banking systems and social dynamics in the
should do which of the following?
countries in which it does business
1) Enter into a standby letter of credit
Global account management requires an understanding of sovereign and political
arrangement with a local bank in the countries in
risks. Multinational firms are exposed to varying degrees of political risk depending
which it does business
upon attitudes and policies of the host country and the nature of the business. A
2) Understand the unique banking systems
firm with operations in foreign countries must be knowledgeable about the
and social dynamics in the countries in which it
laws, regulations, taxes, and customs that govern business activities, as well as the
does business
overall political and social dynamics of the countries where capital is invested.
3) Find resident national investors to increase
its local ownership and knowledge of local customs
For more information on this topic, please refer to Chapter 7, Topic
4)Become a member of SWIFT or CHIPS
4. Question ID: CTP7-PT07.4-001
If two banks have accounts with each other for the
2) Correspondent bank clearing channel
purpose of clearing and settlement of payment
items between those banks, what check clearing
In a correspondent banking relationship, two banks have accounts with each
channel is represented?
other for the purpose of clearing and settling payments. These correspondent
relationships may be reciprocal (i.e., both banks move value both ways and have
1) Clearing house clearing channel
accounts with each other) or one-way (i.e., a small bank may have an account
2) Correspondent bank clearing channel
with a larger bank for clearing purposes).
3) Federal Reserve bank clearing channel
4) On-us check clearing channel
For more information on this topic, please refer to Chapter 4, Topic
2. Question ID: CTP7-PT04.2-001
A multinational company wants to send e-commerce
1) UN/EDIFACT
data between a number of Asian countries. Which of the
following would facilitate communication by using
UN/EDIFACT is a set of internationally agreed-upon standards, directories, and
internationally agreed-upon standards and
guidelines for electronic exchange of data. UN/EDIFACT has been adopted by
guidelines?
the International Organization for Standardization (ISO) as the ISO 9735 standard.
UN/EDIFACT standards are used widely in Europe and in some Asian countries.
1) UN/EDIFACT
UN/EDIFACT standards are not compatible with ASC X12 EDI standards, but
2) SWIFT
there is translation software available that allows for integration of EDI data with
3) BAI2
either standard.
4) ASC X12
For more information on this topic, please refer to Chapter 15, Topic 5.
Question ID: CTP7-PT15.5-002
Embezzlement is an example of what type of risk?
4) Defalcation Risk
1) Technology Risk
Employees can be a significant source of internal operational risk. In many
2) Counterparty Risk
operational risk disasters, a single employee has been responsible for staggering
3) Expropriation Risk
losses that could have been prevented by appropriate oversight and controls.The
4)Defalcation Risk
general risk of intentional employee fraud is known as defalcation risk, while the
specific case of theft of money, securities, or property by an employee is known
as fidelity risk. Employee fraud risk is not limited to the theft of company assets,
but can also include the purposeful violation of company policies or
procedures to improve performance ratings or compensation, or to cover up
errors and mistakes.
For more information on this topic, please refer to Chapter 16, Topic 3.
Question ID: CTP7-PT16.3-003
Practice Exam Questions
Terms in this set (170)
Which of the following makes it possible for electronic 1) Single Euro Payments Area (SEPA)
payments within and across member countries to be
treated as if they were in-country funds transfers? The Single Euro Payments Area (SEPA), an initiative of the European Union, ensures that
electronic payments within the Eurozone are handled in a standardized and inexpensive
Single Euro Payments Area (SEPA) manner across all countries of the Eurozone. In effect, cross-border payments within the
International Bank Account Number (IBAN) SEPA boundaries are treated as if they were in-country rather
Bank Identifier Code (BIC) than cross-border payments.
Trans-European Automated Real-Time Gross
Settlement Express Transfer System (TARGET) For more information on this topic, please refer to Chapter 4, Topic 4.
TARGET2 payment system Question ID: CTP7-PT04.4-003
,A treasury professional has risk minimization as a
3) 3.10 Years
primary goal when selecting between several
potential projects. Using the limited data in the table
The payback period equals the number of years required to recover the initial
below, what is the payback period of the project that
investment. This measure is significant because 1) the faster the investment is repaid,
would exhibit the least risk?
the faster the funds can be invested in another opportunity and 2) investments with
short payback periods are considered to be less risky than those with longer
Year Project A Project B Project C
payback periods. Therefore, all other things being equal, the project with the
0 ($6,000,000) ($4,000,000) ($2,500,000)
shortest payback period is considered to be the least risky.
1 $1,500,000. $985,000. $0
To find the payback period, add up the amounts earned in each whole year until
2 $1,500,000. $985,000. $0
the remainder will be paid back in the following year. For that year, divide the
3 $1,750,000. $1,850,000. $2,100,000 remaining amount needing to be paid back by the total cash inflow that year to
4 $2,000,000. $1,850,000. $2,100,000 determine the portion of that year needed to pay back the initial investment. The
5 $2,000,000. $1,850,000. $8,100,000 payback period is calculated as the year that the initial amount will be paid back
plus this fractional amount of a year, which indicates at what point in this year the
Assume that all cash inflows occur evenly throughout initial investment will be repaid.
each year. Project A has a payback period of 3.63 years
Project B has a payback period of 3.10 years
1) 3.63 Years Project C has a payback period of 3.19 years
2) 2.25 Years Therefore, Project B, with a payback period of 3.10 years is the least risky project
3) 3.10 Years based solely on payback period.
4) 3.19 Years
Please refer to Chapter 9 topic 3 for more information on this topic.
Question ID: CTP7-PT09.3-007
What type of arrangement exists when creditors work
3) Informal bankruptcy
directly with management to establish a plan for
returning the organization to a sound financial
It is possible to perform a reorganization or a liquidation informally. An
basis, such as by restructuring some of the debt?
informal reorganization typically involves a firm that is fundamentally sound, but
is undergoing temporary financial difficulties. This is often done outside of
1) Freefall
bankruptcy in an agreed-upon write-off of some portion of the firm’s debts by
2) Pre-arranged
its creditors.The firm’s creditors work directly with management to establish a plan
3) Informal bankruptcy
for returning the firm to a sound financial basis. These plans usually involve some
4)Pre-packaged
restructuring of the firm’s debt, with creditors agreeing either to reduce or
reschedule debt payments in order to ensure the firm’s continuing operation.
For more information on this topic, please refer to Chapter 2, Topic
6. Question ID: CTP7-PT02.6-001
,A contractor's failure to complete a construction
4) Surety loss
project is considered which of the following types of
loss?
Effective risk management helps to control or prevent losses, and adequate
insurance helps to finance an organization’s recovery when a loss occurs. Events
1) Liability loss
resulting in a major loss generally disrupt an organization’s operating and
2) Property loss
financial plans. Losses occur for a variety of reasons, and as a result there are
3) Personnel loss
different types of policies designed to cover specific losses.Examples of
4)Surety loss
potential insured losses include:
Property loss (e.g., from fire or flood)
Business interruption or net income loss (e.g., due to the physical loss of a
building) Surety or breach of contract loss (e.g., a contractor's failure to
perform) Liability loss (e.g., from lawsuits by injured customers)
Personnel loss (e.g., loss of the president or other key employees)
Workers' compensation claims (e.g., from employee injury)
Cyber-risk loss (e.g., loss caused by data or network security
breach) Crime loss (e.g., from internal or external theft)
For more information on this topic, please refer to Chapter 16, Topic 5.
Question ID: CTP7-PT16.5-001
Which of the following statements is true of the Check
1) One party can provide a copy or an image of the check and never
Clearing for the 21st Century Act (Check 21)?
provide the original document to the other party
1) One party can provide a copy or an
The Check Clearing for the 21st Century Act provided the basis for
image of the check and never provide the original
electronic clearing of checks by allowing the substitution of a copy or image
document to the other party
of a check for the original document in the clearing process. The act was
2) The law makes the Fed service of
intended to speed and facilitate the clearing of checks—by eliminating the
check clearing available to all deposit-taking
need to exchange physical paper—and improve the overall efficiency of the
institutions
payment system.
3) It adds legal barriers to check
clearing for prevention of money
For more information on this topic, please refer to Chapter 4, Topic
laundering
5. Question ID: CTP7-PT04.5-001
4)It is an amendment to Regulation G
A key objective of successful treasury management
4) Ensuring liquidity
is
_____________.
The primary goal of treasury management is to effectively and efficiently manage
an organization’s cash and related financial assets (and liabilities) to support the
1) Increasing dividend income
achievement of the organization’s business objectives and strategy. This goal is
2) Indexing securities to the market
critical because all firms, no matter how successful, have a finite amount of liquid
3) Creating an investment policy
assets on hand during a given period of time.
4)Ensuring liquidity
For more information on this topic, please refer to Chapter 1, Topic
2. Question ID: CTP7-PT01.2-001
, For a company to be successful in selling overseas, it
2) Understand the unique banking systems and social dynamics in the
should do which of the following?
countries in which it does business
1) Enter into a standby letter of credit
Global account management requires an understanding of sovereign and political
arrangement with a local bank in the countries in
risks. Multinational firms are exposed to varying degrees of political risk depending
which it does business
upon attitudes and policies of the host country and the nature of the business. A
2) Understand the unique banking systems
firm with operations in foreign countries must be knowledgeable about the
and social dynamics in the countries in which it
laws, regulations, taxes, and customs that govern business activities, as well as the
does business
overall political and social dynamics of the countries where capital is invested.
3) Find resident national investors to increase
its local ownership and knowledge of local customs
For more information on this topic, please refer to Chapter 7, Topic
4)Become a member of SWIFT or CHIPS
4. Question ID: CTP7-PT07.4-001
If two banks have accounts with each other for the
2) Correspondent bank clearing channel
purpose of clearing and settlement of payment
items between those banks, what check clearing
In a correspondent banking relationship, two banks have accounts with each
channel is represented?
other for the purpose of clearing and settling payments. These correspondent
relationships may be reciprocal (i.e., both banks move value both ways and have
1) Clearing house clearing channel
accounts with each other) or one-way (i.e., a small bank may have an account
2) Correspondent bank clearing channel
with a larger bank for clearing purposes).
3) Federal Reserve bank clearing channel
4) On-us check clearing channel
For more information on this topic, please refer to Chapter 4, Topic
2. Question ID: CTP7-PT04.2-001
A multinational company wants to send e-commerce
1) UN/EDIFACT
data between a number of Asian countries. Which of the
following would facilitate communication by using
UN/EDIFACT is a set of internationally agreed-upon standards, directories, and
internationally agreed-upon standards and
guidelines for electronic exchange of data. UN/EDIFACT has been adopted by
guidelines?
the International Organization for Standardization (ISO) as the ISO 9735 standard.
UN/EDIFACT standards are used widely in Europe and in some Asian countries.
1) UN/EDIFACT
UN/EDIFACT standards are not compatible with ASC X12 EDI standards, but
2) SWIFT
there is translation software available that allows for integration of EDI data with
3) BAI2
either standard.
4) ASC X12
For more information on this topic, please refer to Chapter 15, Topic 5.
Question ID: CTP7-PT15.5-002
Embezzlement is an example of what type of risk?
4) Defalcation Risk
1) Technology Risk
Employees can be a significant source of internal operational risk. In many
2) Counterparty Risk
operational risk disasters, a single employee has been responsible for staggering
3) Expropriation Risk
losses that could have been prevented by appropriate oversight and controls.The
4)Defalcation Risk
general risk of intentional employee fraud is known as defalcation risk, while the
specific case of theft of money, securities, or property by an employee is known
as fidelity risk. Employee fraud risk is not limited to the theft of company assets,
but can also include the purposeful violation of company policies or
procedures to improve performance ratings or compensation, or to cover up
errors and mistakes.
For more information on this topic, please refer to Chapter 16, Topic 3.
Question ID: CTP7-PT16.3-003
