True/False Quiz

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Chapter 9:   Cash and Marketable Securities Management

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1. A firm should hold a cash balance roughly equal to its future need for cash.

2. One objective of cash management is to obtain reasonable interest income on any temporarily idle funds.

3. A lock box is a post-office box maintained by a firm's bank that is used as a receiving point for customer remittances.

4. "Playing the float" involves writing checks when there are no actual funds in the account but having the money available when the checks are presented for payment.

5. A zero-balance account (ZBA) is one in which checks "bounce" due to insufficient funds available to cover checks presented.

6. A problem with T-bills is that costs involved in selling them in the secondary market are quite high.

7. Commercial paper offers a higher yield than Treasury securities of the same maturity.

8. The Eurodollar is the official unit of currency of the European Union.

9. In general, the longer the maturity of a security, the less the yield.

10. Longer-term, less marketable securities can be an appropriate choice for the free cash segment (F$) of a firm's securities portfolio.

11. There are several methods commonly used to calculate the yield on US Treasury bills including the Bond Equivalent Yield (BEY) method and the Effective Annual Yield (EAY) method.
The following items are NEW to the 13th edition.

12. A "substitute check" (also called an image replacement document (IRD)) is a paper copy of an electronic image of an original check, both front and back, including all endorsements.

13. In the US, "Check 21" requires banks to convert checks into an electronic image.

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