Your Firm has excess cash throughout the year. A conservative forecast is that you have...
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Finance
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% 6 mths 1.65% 9 mths 1.75% 12 mths 2.00% at the bank.
The Treasurers 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 JDL 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%
Please explain what course of action you would take covering the following topics:
