QUESTION 3

A. Explain what ringgit negotiable instruments of deposits (NIDs) are and state its special features.

B. What are the major differences between NIDs and fixed deposits (FDs)?

C. UUM Bank bought RM 50 million of USM Banks NID on 30 April 2020 to mature on 30 August 2020.

i. Initially what risks would UUM Bank have to consider before buying USM Banks NIDs?

ii. What would be the maturity proceeds if the coupon paid was 3.75% p.a?

iii. On 8 July 2020, UUM Bank sensed that interest rates were moving upwards and therefore, decided to sell RM 25 million of USM Banks NIDs to UMS Bank. Calculate the settlement proceeds that UUM Bank will receive if the transacted rate was 3.95% per annum.

D. Evaluate the pros and cons of investing your surplus funds in NIDs compared to investment in another money market instrument such as bankers acceptance (BA).

THIS SUBJECT IS TREASURY MANAGEMENT

I HAVE ONLY ONE HOUR PLEASE GIVE ANSWER ASAP