Cash Flow Matching Cash Flow Matching 1 / 10 Which of the following is not a benefit of cash flow matching? Minimizing liquidity risk Eliminating reinvestment risk Maximizing potential return on investment Ensuring liabilities are met as they fall due 2 / 10 What is the key difference between cash flow matching and duration matching? Cash flow matching focuses on timing of cash flows, while duration matching focuses on interest rate sensitivity. Duration matching is used for short-term liabilities, while cash flow matching is only used for long-term liabilities Cash flow matching involves equity investments, while duration matching only involves bonds. Cash flow matching is used by banks, while duration matching is used by insurance companies. 3 / 10 In cash flow matching, which type of bond is often used because it provides regular fixed cash flows? Zero-coupon bonds Floating-rate bonds Fixed-rate bonds Convertible bonds 4 / 10 Which of the following is an example of cash outflow from financing activities? Purchasing new equipment Paying off a long-term loan Receiving interest from investments Selling shares to investors 5 / 10 Which of the following is not typically a challenge in cash flow matching? Finding assets that provide the exact cash flow at the right time High transaction costs and fees Liquidity risk being entirely eliminated Managing the interest rate and reinvestment risk 6 / 10 What is another name for cash flow matching when liabilities are matched with asset cash flows? Liability-driven investing (LDI) Portfolio diversification Credit spread investing Growth stock investing 7 / 10 What is a potential downside of cash flow matching? It increases market risk. It reduces flexibility in asset allocation and may lead to lower returns. It increases the volatility of cash inflows. It involves using highly speculative assets. 8 / 10 Which of the following best describes a scenario where cash flow matching is important? A company wants to invest excess cash in high-risk, high-return opportunities. A pension fund needs to ensure it can make regular pension payments to retirees. A start-up company is looking for venture capital funding. A firm wants to improve its profitability in the short term. 9 / 10 In cash flow matching, which risk is minimized by ensuring that asset cash flows align with liability payments? Interest rate risk Reinvestment risk Credit risk Liquidity risk 10 / 10 Cash flow matching involves selecting assets with cash flows that: Are volatile to maximize potential returns. Are timed to match expected outflows from liabilities. Are invested in high-risk ventures for potential higher returns Do not generate income but appreciate in value. Your score isThe average score is 0% 0% Restart quiz By WordPress Quiz plugin
