A fund manager is considering investing in medium-term bonds, commercial papers, and deposit certificates. Under the regulations, which of these can be held under a cash investment fund?
A.
Medium-term bonds and commercial papers only
B.
Commercial papers and deposit certificates only
C.
Deposit certificates and medium-term bonds only
D.
Medium-term bonds, commercial papers and deposit certificates
CISI UAE Financial Rules and Regulations define that cash investment funds may hold commercial papers and deposit certificates only. Medium-term bonds are typically excluded from cash funds as they have longer maturities and more interest rate risk, which conflicts with the liquidity and capital preservation objectives of cash funds. Commercial papers and deposit certificates, with their shorter maturities and high liquidity, are appropriate instruments for cash funds, providing stable, low-risk returns in line with regulatory requirements.
Chosen Answer:
This is a voting comment (?). You can switch to a simple comment. It is better to Upvote an existing comment if you don't have anything to add.
Submit