Corrections to
Preparing for Treasury Management Certification,
Second Edition

• Page 71: In Q6, answer (C) should be 6,667 units. A6 should read as follows:
  6 (C) Variable costs per unit = $150 x .50 = $75.
  Break-even point = ($500,000)/($150 per unit - $75 per unit) = 6,667 units.
• Page 88 Practice Test #2, Question 25.
  For this question, answer (C) I and III only, conforms to the Essentials of Treasury Management. In reality, answer D is correct. The term "slippage" was in an earlier edition of Essentials and we missed this question in reviewing for this edition.
• Page 170: The correct answer to Question 23 is C. The answer printed is clearly wrong because it is impossible.
• Page 171, Practice Test #3, Problem # 26 does not offer the correct solution. The choices should be: (A) $500,000; (B) $530,000; (C) $475,000; (D) $525,000. On page 329, the calculation to arrive at the correct answer (B) should be as follows:
  (500,000 x .2) + (750,000 x .4) + (400,000 x .2) + (250,000 x .2) = $530,000
• Pages 177 and 178, Q1 and in Q2 show inventory as $5,000. It should be $75,000. The calculations that follow both questions are correct as printed.
• Page 195, the correct answer for Q1 is (A) 6.06%.
  The calculation in A1 should be: [$1,000,000 - 990,000/$990,000] x [60/60] = 6.06%.
• Page 203, the first sentence in the gray box at the top of the page is reversed. It should read as follows: "An easy way to remember how to compute effective rates is to divide what you paid (interest and other fees) by what you received (usable loan), then annualize (365 over the average days the loan was outstanding). . . ."
• Page 205, a typographical error in the computation of the backup line cost caused two further errors on this page.
  1. Computing the backup line cost should read as follows:
     "Backup line cost =
     .0025 x $5,000,000 x 60/360 = $2,083.25."
  2. Computing the effective cost should read as follows:
     "Effective cost =
     ($50,000 + 2,083.25 + 1,041.67) / ($4,950,000) X [364/60]
     Effective cost = 6.53%."
  3. The sentence following the computing of the effective cost should read as follows:
     "In this case, the effects of discounting, dealer's commission, and backup line added 53 bp to the cost of the commercial paper."
• Page 284: Both (B) and (C) are correct answers to question 17. Euro clearing is done via CHAPS Euro, a subset of the overall payment system. CHAPS is an arm of the UK's real-time gross settlement system (RTGS), and all EMU countries use their RTGS systems to settle via TARGET. So in reality CHAPS Euro (and this is how it should be shown) is the UK way of doing this. But since the UK does not use the euro as its currency, you wouldn't consider its RTGS CHAPS system as a "primary" clearing system (despite what Essentials has to say). You should not expect questions this technical on the exam, however.
• Page 295: Answer (B) for question 19 should be II only, not I only.
• Page 304: Question 72 should read: "Which of the following are non-cash US payment systems?" The correct answer is (C), as given.
• Page 307: Answer (B) for question 89 should be 70.69. The solution given on page 333 should be as follows:
  ($5,500,000)/[($2,350,000 + $2,360,000 + $2,370,000)/91] = 70.69 days. The solution in the book is incorrect because the period April through June has 91 days, not 92.
• Page 308: Answer (B) for question 90 should be 10.69.
• Page 308: Question 92 should also give the total current assets ($2,500) or total current liabilities (1,000).
• Page 310: The problem statement is incorrect. It should state that there was an upfront investment of $1,900,000 and a payback of $575,000 each year for four years.
• Page 314: There is a typo in question 126. The amount of disbursement should be $100,000, not $200,000. The answer selections and the solution key are consistent with $100,000.
• Page 318: For question 148 the correct answer should be (D) not (B).
• Page 318: For question 149 the correct answer should be (C) not (B).