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Certified Treasury Professional CTP Exam Questions

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Question #1 (Topic: demo questions)

Which of the following instruments simplifies the paperwork connected with loans that have multiple advance features

A.
Master note
B.
 Banker's acceptance
C.
Indenture agreement
D.
Note purchase agreement
Correct Answer: A
Explanation:
A master note is a single loan agreement that covers multiple loan advances under one set of terms and conditions. Instead of preparing and signing a new promissory note for each advance, the borrower and lender use the master note to simplify documentation and reduce paperwork for revolving or multiple-disbursement loans. In contrast, a banker's acceptance is a trade finance instrument, an indenture agreement governs bond issues, and a note purchase agreement is used in private debt placements rather than for managing multiple loan advances. Therefore, A. Master note is the correct answer.
Question #2 (Topic: demo questions)

An arrangement in which a borrower makes periodic payments to a separate custodial account that is used to repay debt is known as a:

A.
sinking fund
B.
balloon payment
C.
mortgage
D.
zero-coupon bond
Correct Answer: A
Explanation:

A sinking fund is an arrangement in which a borrower makes regular periodic payments into a separate custodial or reserve account. The accumulated funds are then used to repay the debt, often at maturity or to retire portions of the debt over time. This reduces the lender's risk by ensuring money is set aside for repayment. In contrast, a balloon payment is a large final payment at the end of a loan, a mortgage is a loan secured by real estate, and a zero-coupon bond is issued at a discount and pays no periodic interest until maturity. Therefore, A. Sinking fund is the correct answer.
Question #3 (Topic: demo questions)

A company plans to issue additional equity within the next 12 months but needs to issue debt at a low interest rate now. Which of the following instruments would BEST meet this objective?

A.
Convertible bonds
B.
Private placement issue
C.
 Preferred stock
D.
Subordinated debentures
Correct Answer: A
Explanation:
Convertible bonds are the best choice because they allow a company to issue debt now at a lower interest rate while giving investors the option to convert the bonds into equity at a later date. Since the company plans to issue additional equity within the next 12 months, convertible bonds align perfectly with this objective by reducing current borrowing costs and facilitating a future transition from debt to equity. In contrast, a private placement issue is simply a method of issuing securities, preferred stock is already an equity instrument rather than debt, and subordinated debentures are unsecured debt that generally require higher interest rates due to their greater risk. Therefore, A. Convertible bonds is the correct answer.
Question #4 (Topic: demo questions)

An instrument that gives the right to buy a stated number of shares of common stock at a specified price is known as

A.
an equity warrant
B.
a put option
C.
a zero coupon bond
D.
a subordinated debenture 
Correct Answer: A
Explanation:
An equity warrant is a financial instrument that gives the holder the right, but not the obligation, to purchase a specified number of shares of a company's common stock at a predetermined price (exercise price) before a specified expiration date. Companies often issue warrants along with bonds or preferred stock to make these securities more attractive to investors. In contrast, a put option gives the right to sell shares, a zero-coupon bond is a debt instrument issued at a discount with no periodic interest payments, and a subordinated debenture is an unsecured bond that ranks below other debts in repayment priority. Therefore, A. An equity warrant is the correct answer.
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