The worked question on this page is original educational practice. It is not represented as a question from an official previous-year examination paper.
01 / UNDERSTANDING
Review the question
Create an original placement choice with a known payment date. The strongest answer explains timing and risk together; do not claim that the newly written scenario appeared in a previous examination. Present a higher-yield placement that matures after a known obligation and a lower-yield alternative that matures before it. Ask what further information is needed, including early-sale liquidity, rather than making yield alone the ranking rule or assuming marketability without evidence.
02 / UNDERSTANDING
The concept in context
A short maturity does not remove every risk. An instrument can involve counterparty risk, market-price changes or difficulty selling before maturity. The holder should also consider whether the instrument's cash flow aligns with the obligation it is intended to fund at the required time.
03 / UNDERSTANDING
A worked learning case
A treasury team expects a payment obligation next week and considers two short-term placements. One matures before the payment date; the other might need to be sold early. The comparison includes cash availability and marketability, rather than choosing solely from the higher stated yield of the second placement.
ORIGINAL EDUCATIONAL PRACTICE
Try it before you check.
Does short maturity make an instrument completely risk-free?
Show the answer and reasoning
No.
Maturity describes time until contractual payment, not every condition affecting payment or market value. Counterparty exposure, early-sale liquidity and pricing can still matter. An investment intended to meet a known obligation should therefore be assessed for both credit quality and the timing of reliably available cash.
Two traps to watch for.
- Equating a short tenor with absence of all risk.
- Ignoring the need to sell early when matching a payment date.
YOUR TOPIC-SPECIFIC LEARNING MAP
Learn from the attempt
Identify the treasury team's payment date and cash requirement.
Compare instrument maturity with that known obligation.
Separate credit quality from marketability before choosing a placement.
Explain the idea, apply it to a new situation, then check what changed in your reasoning.
BANKERS TUTORIAL · SOURCE NOTES
Keep the source alongside your notes.
Official links provide subject context and authoritative reference material. This guide’s explanation, scenario and question are original Bankers Tutorial learning content.
- iibf.org.in https://iibf.org.in/jaiib-junior-associate-IIBF
- iibf.org.in https://iibf.org.in/documents/RulesSyllabus/2026/FlagshipCourses/21%20-%20JAIIB-Final_Exam_24.07.25_Final_23.02.2026.pdf
- www.rbi.org.in https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=7680
For JAIIB preparation, check the current official notice before relying on changing dates, rules or examination requirements.
