Zero Balance Accounts Are Commonly Used

question 26

Multiple Choice

Zero balance accounts are commonly used:

• A) As the primary chequing account from which investments are made.
• B) As the master account for a firm.
• C) As a payroll account.
• D) To hold the safety stock for all of a firm's banking accounts.
• E) In place of lockboxes.

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Definitions:

Risk-Free Interest Rate

The theoretical return on an investment with no risk of financial loss, typically represented by the yield on government securities.

Futures Price

The predetermined price at which a futures contract is agreed upon to buy or sell an asset at a future date.

Short Hedge

A risk management strategy used to offset potential losses in investments by taking an opposite position in related assets or derivatives.

Spot Market

A public financial market where commodities or financial instruments are traded for immediate delivery.