Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. your firm has excess cash throughout the year. a c

Your Firm has excess cash throughout the year. A conservative forecast is that you have...

70.2K

Verified Solution

Question

Finance

Your Firm has excess cash throughout the year. A conservative forecast is that you have $15-$25 million in short term investable cash over the next 12 months.

The Treasurer is concerned that although you are using a concentrated cash management system with a major bank that FDIC only covers $250,000. Currently your firm is investing in short term time deposits (less than 90 days) with an average return of 1.25 %. The yield curve is positive with the following deposit rates: 7 days 0.75% 3 mths 1.50% 6 mths 1.65% 9 mths 1.75% 12 mths 2.00% at the bank.

The Treasurers main concerns are capital preservation and diversification of risk. According to various industry sources the following represents the returns on the following money market funds (MMF) from JDL Asset Management, a highly regarded industry money manager known for outstanding performance and credit analysis.

Selection:

Prime MMF: 1.50%

Government MMF: 1.10%

Treasury MMF: 0.90%

Treasury only MMF: 0.60%

Please explain what course of action you would take covering the following topics:

-Capital Preservation Diversification of Risk Liquidity Risk Counterparty Risk Interest Rate Risk

Operational Risk (settlement risk/human error/efficiency of staff).

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students