Ten to fifteen percent of the questions on the CTP exam require you to perform a calculation to arrive at the correct answer. And most of these calculations, which require you to solve an equation or get the answer by using an arithmetic process, are outlined and expanded upon in the BOK. However, there is one calculation, the Balance Multiplier, which appears as almost an afterthought in Exhibit 3.3 "Calculation of Required Collected Balance" (see references below).

This calculation, which is a spin-off calculation of Collected Balances Required (CBR), is an important bank relationship management tool that can be used where you are compensating your banks for services with balances rather than with fees. It indicates the amount of additional collected balances required to cover one dollar of additional services. For example, let's assume that the Balance Multiplier for one of your banks is $270 and the bank relationship manager is sitting across your desk and suggesting that you consider using a new service that the bank has to offer. Since you are compensating the bank with balances and this new service will increase the monthly service charge by $500 you can quickly make a rough estimate that your CBR will increase by approximately $150,000 (you do this by rounding $270 up to $300 and multiplying it by $500).

As a practitioner I used the Balance Multiplier in many situations such as the one outlined in the above example and therefore I understand its value as an important tool for managing the bank relationship. So, even though it is not expanded upon in the BOK, I think it could be on the exam as a calculation question. And since it is a spin-off calculation of the CBR, I'd like to first simplify the CBR equation as follows, so that it might be easier to memorize:

                                  CBR    =   SC   x   365 / ECR   x   .9    x   Days

            Where:            SC   =   Monthly Service Charge

                                   ECR   =   Earnings Credit Rate

                                    .9      =   (1 - Reserve Requirement @ 10%)

                                   Days =   Days in Month

The Balance Multiplier equation is the same as the CBR equation except that it assumes a SC equal to $1, like so

           Balance Multiplier  =   $1    x    365 / ECR   x   .9   x   Days

                                            =    365 / ECR   x   .9   x   Days

-          George Schilling, CTP

Exhibit 3.3 References: AFP Learning System, Treasury, Module One, Chapter 3, Pg. 1-150

                                           ETM 3^rd ED., Chapter 3, Pg 106