Name 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% 6mths 1.65% 9 mths 1.75% 12 mths 2.00% at the bank. The Treasurer's 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 Molloy 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% Another option is to purchase (invest) in certificates of deposit (cds) (minimum of 7 days 365 days) directly with other major banks. Large or wholesale bank cds are negotiable instruments that can be sold in the secondary market though investment banks/broker-dealers. 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). Name 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% 6mths 1.65% 9 mths 1.75% 12 mths 2.00% at the bank. The Treasurer's 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 Molloy 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% Another option is to purchase (invest) in certificates of deposit (cds) (minimum of 7 days 365 days) directly with other major banks. Large or wholesale bank cds are negotiable instruments that can be sold in the secondary market though investment banks/broker-dealers. 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)
