2010 Sem1 QUIZ3

2010 Sem1 QUIZ3:

1) Calculate the effective annual interest rate if your bank quotes you 10% per annum, compounded quarterly. A. 14.01% B. 10.38% 100% C. 10% D. 2.50%

2) The present value of an ordinary annuity with equal monthly payments of $300 over the next four years, assuming market interest rates are 12% per annum, is: A. $911.20 B. $1170.59 C. $11 392.19 100% D. $18 366.78

3) Calculate the effective annual interest rate if you are quoted 8% per annum, compounded half yearly. A. 8.27% B. 8.16% 100% C. 8.0% D. 4.0%

4) An $8000 bank deposit earning compound interest of 8.21% per annum grows to _______ in 5.25 years. A. $11 284.00 B. $12 058.14 C. $12 105.81 100% D. $16 019.15

5) If you receive $10 000 back as principal and interest at the end of two years for an initial investment of $9127 at the start of the term, what is the yield on your investment? A. 4.37% per annum B. 4.78% per annum 100% C. 8.73% per annum D. 9.57% per annum

6) A major advantage of a bill financing facility is that it: A. lowers the acceptor's fees for a bank bill B. lowers the drawer's cost in drawing up the bill C. allows businesses to access financing at a lower cost than overdrafts 100% D. lowers the discounter's fee for taking on risks associated with the bill

7) Most agreements involving factoring of accounts receivable are made on a _______ basis. A. non-recourse B. notification 100% C. recourse D. non-notification

8) Compared with bill financing, commercial paper financing offers a large company: A. higher costs because of the need for collateral B. higher costs owing to the acceptance fee involved C. lower costs owing to no contingent liability when sold on 100% D. lower costs owing to lower bank fees

2010 Sem1 Quiz3 1

9) The interest rate charged on an unsecured short-term loan to a company is generally ________ the interest rate on a secured loan. A. lower than B. the same as C. higher than 100% D. unrelated to

10) A company is likely to issue a bank bill if it wants: A. long-term financing B. to spread its interest payments over the medium term C. short-term financing D. to invest medium-term funds 0%

11. When a lender includes conditions in a loan agreement to protect its loan, these are known as: A. loan agreements B. loan covenants 100% C. loan terms D. loan actions

12. A term loan is: A. a bill issued to finance a specific trade transaction B. a bill issued to raise funds for general purposes C. a flexible funding arrangement for companies D. when funds are borrowed for a set period 100%

13. The type of loan where a company pays periodic interest payments over its term and the principal at maturity is called: A. amortised B. a debit foncier C. deferred payment D. interest-only 0%

14. ________ has generally no charge over the issuing company's unpledged assets. A. A debenture B. A subordinated debenture C. A floating charge debenture D. An unsecured note 100%

15. Which of the following best describes a fully amortised term loan? A. An interest-only loan with principal repayable at maturity B. Periodic repayments, including interest and principal reduction 100% C. Interest repayments on the loan are fixed for the period of the loan D. A 'low-start' loan whose repayments are increased over the term

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1. The present value of an annuity of $11 000, received at the end of every year for ten years, where the required rate of return is 5.6% per annum, compounded annually, is: A. $6379.01 B. $7051.28 C. $8251.76 D. $82 517.62 100%

2. What is the present value of $1 million payable in 90 days at 8.00% per annum simple interest? A. $835 240.27 B. $974 372.66 C. $980 655.56 100% D. $1 002 747.25

3. When a company discounts a commercial bill, this means the company: A. borrows funds 100% B. buys a commercial bill C. lends surplus funds D. invests in commercial bills

4. The main difference between an annuity and an annuity due lies in the: A. number of payments B. time of the first payment 100% C. interest rate D. frequency of payments

5. An investor plans to save $1000 per year for the next ten years as a retirement fund, and expects to earn 8.4% per annum, compounded monthly over the period, on all invested funds. How much will the investor have at the end of ten years? A. $187 085.48 100% B. $296 035.24 C. $126 882.77 D. $153 178.10

6. Which of the following statements about bank bills is INCORRECT? A. The interest rate on a bank bill is generally higher than on a bank overdraft. B. The interest rate on a bank bill is generally lower than the yield on a Treasury note. 100% C. The interest rate on a bank overdraft is generally higher than the yield on a Treasury note.

D. The interest rate on a bank overdraft is generally higher than the yield on a Treasury bond.

7. Which one of the following statements is true? A. As a promissory note is a one-name paper, only the buyer is required to endorse it.

B. If a bank agrees to accept it, a corporation can issue a promissory note. C. Usually, initial buyers of promissory notes hold them until maturity. 0% D. Typically, a promissory note will be issued for 90 days.

8. Upon maturity, the final holder of the bill approaches the _________ for payment. A. drawer B. acceptor 100% C. endorser D. discounter

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9. Which of the following rates serves as a reference interest rate in the United Kingdom? A. BBSW B. LIBOR 100% C. USCP D. SIBOR

10. When compared with bank bills, commercial paper has the advantage: A. that no interest is paid until maturity, unlike for a bank bill B. that a holder of commercial paper has no contingent liability when selling in the money markets

C. that an issue of commercial paper often has a rollover facility attached, unlike for bank bills 0%

D. of greater liquidity in the secondary market

11. Bonds are: A. a type of equity financing B. a short-term financial arrangement with periodic interest payments C. a debt instrument issued at discount with interest and principal repaid at maturity

D. long-term debt instruments 100%

12. One of the advantages of a prime rate set by a financial institution is that it is less likely to be affected by: A. changes in the bank bill swap rate B. short-term market illiquidity 100% C. short-term credit fluctuations D. long-term credit fluctuations

13. When the coupon rate of a bond is equal to the current market interest rates, a bond will sell at: A. discount B. par 100% C. premium D. book value

14. Which of the following statements is correct? A. Short-term debt instruments are more volatile in price than long-term instruments.

B. Coupon rates are generally fixed when the bond is issued. C. Bond prices and market interest rates move together. D. The higher the coupon of a bond, the lower its price. 0%

15. Which of the following is NOT usually an example of restrictive debt covenants? A. Limitations on additional borrowing B. Constraints on disposal of non-current assets C. Minimum levels of cash flow 0% D. Supplying the creditors with annual, audited financial statements

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1. An $8000 bank deposit earning compound interest of 8.21% per annum grows to _______ in 5.25 years. A. $11 284.00 B. $12 058.14 C. $12 105.81 100% D. $16 019.15

2. A 90-day promissory note with a face value of $500 000 is issued at a yield of 7.789% per annum. Calculate its price. A. $379 971.77 B. $419 442.84 C. $490 578.08 100% D. $490 711.67

3. When a company discounts a commercial bill, this means the company: A. borrows funds 100% B. buys a commercial bill C. lends surplus funds D. invests in commercial bills

4. If the effective annual interest rate is known to be 16.0% on a debt that has monthly payments, what is the annual percentage rate? A. 16.00% B. 14.93% C. 12.45% D. 1.33% 0%

5. If you invest $13 500 for 18 months at 6.9% per annum simple interest, what is the value of your at the end of the 18 months? A. $14 431.50 B. $14 897.25 100% C. $21 647.25 D. $22 815.00

6. What is a bill of exchange either accepted or endorsed by a bank called? A. A commercial bill B. A bank bill 100% C. A trade bill D. A negotiable bill

7. A company is offered credit terms of 2/10 n/40, but decides to forgo the cash discount and pay on the 45th day. What is the company's cost of forgoing the cash discount? A. 18.6% B. 21.28% C. 24.83% 0% D. None of the given answers.

8. As an alternative to issuing a commercial bill for short-term financing, corporations with an excellent credit standing may: A. buy commercial paper B. issue commercial paper100% C. issue preference shares D. issue convertible notes

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B. If a bank agrees to accept it, a corporation can issue a promissory note. C. Usually, initial buyers of promissory notes hold them until maturity. D. Typically, a promissory note will be issued for 90 days. 100% 10. Which of the following statements about bills is INCORRECT? A. There is an active secondary market in bank-accepted bills. B. Once a bill has been discounted into the marketplace, the cost of funds will vary for the issuer.

C. The drawer has a liability with a bank-accepted bill to pay face value to the acceptor bank. 0%

D. At maturity for a bank-accepted bill, the acceptor will pay face value to the holder.

11.The coupon interest of a bond is calculated based on its _______, and is paid periodically. A. market value B. book value C. face value 100% D. surrender value

12. If a company wished to structure its financing so it repaid funds borrowed only when a project had positive cash flows, it would choose a/an: A. fully drawn advance B. term loan C. interest-only loan D. deferred payment loan 100%

13. Which of the following is NOT an advantage of leasing from the lessor's perspective (compared with offering a straight loan)? A. Leasing has a relatively low default risk. B. Administration costs may be lower for a lease than for a straight loan. C. The return to the lessor may be higher than for a straight loan. 0% D. The lessor may use the funds for other investment opportunities.

14. What is the current price of a debenture with a $500 000 face value, a coupon rate of 9.5% paid semi-annually, six years remaining to maturity and market interest rates increased to 14%? A. $320 149.12 0% B. $401 613.48 C. $410 644.78 D. $688 638.80

15. The purpose of debt covenants that ban borrowers from entering into certain types of leases is to: A. limit the amount of fixed-interest payments B. prevent the firm from supplying too many cars to employees C. protect the lender in their claim over pledged assets in the event of failure 0% D. protect the shareholders' claims over assets

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1. If you invest $1600 for a year at 6.8% per annum simple interest, how much interest will you earn? A. $10.80 B. $108.00 100% C. $1088.00 D. $1708.80

2. If you invest $12 000 for 4.75 years at 7.88% per annum, with interest compounded monthly, what will your total investment be worth at the end of the period? A. $12 378.94 B. $15 476.29 C. $16 232.40 D. $17 426.34 100%

3. If you invest $7500 for a year at 7.4% per annum simple interest, what is the value of your investment at the end of the year? A. $555.00 B. $5550.00 C. $8055.00 100% D. $13 050.00

4. You are considering an investment that will pay a lump sum of $50 000 at the end of six years and you decide that 9% per annum compounded monthly is an appropriate discount factor. What is the value of the investment in today's dollar terms? A. $31 508.48 B. $32 496.57 0% C. $31 934.98 D. $47 846.89

5. If the effective annual interest rate is known to be 19.4% on a debt that has quarterly payments, what is the annual percentage rate? A. 19.40% B. 19.10% C. 18.13% 100% D. 18.00%

6. Where a company wants to guarantee all of its issue of commercial paper, it can arrange for it to be: A. sold by tender B. underwritten 100% C. sold by tap D. sold with a face value less than $10 000

7. A company is offered credit terms of 2/10 n/40, but decides to forgo the cash discount and pay on the 45th day. What is the company's cost of forgoing the cash discount? A. 18.6% B. 21.28% C. 24.83% 0% D. None of the given answers.

8. Which of the following is NOT an advantage of factoring? A. Known cash flows are generated. B. Accounts receivable is turned into cash without delay. C. The credit and collection department of a company may be eliminated. D. The cost of financing is relatively high. 100%

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B. If a bank agrees to accept it, a corporation can issue a promissory note. C. Usually, initial buyers of promissory notes hold them until maturity. D. Typically, a promissory note will be issued for 90 days. 100%

10. The interest rate charged on an unsecured short-term loan to a company is generally ________ the interest rate on a secured loan. A. lower than B. the same as C. higher than 100% D. unrelated to

11. The main longer-term finance provided by financial intermediaries is: A. certificates of deposit B. commercial paper C. corporate bonds 0% D. term loans

12. A key difference between a positive covenant and a negative covenant is, for a: A. positive covenant, a company must comply with restrictions on its financial structure

B. negative covenant, a company must maintain a minimum level of working capital

C. negative covenant, a company must provide annual audited financial statements 0%

D. positive covenant, a company must maintain a minimum debt to gross cash flow ratio

13. When a lender includes conditions in a loan agreement to protect its loan, these are known as: A. loan agreements B. loan covenants 100% C. loan terms D. loan actions

14. When the coupon rate of a bond is below the current market interest rates, a bond will sell at: A. discount 100% B. par C. premium D. face value

15. Which of the following is NOT usually an example of restrictive debt covenants? A. Limitations on additional borrowing B. Constraints on disposal of non-current assets C. Minimum levels of cash flow 0% D. Supplying the creditors with annual, audited financial statements

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1. If you receive $100 000 back as principal and interest at the end of the year for an initial investment of $93 456 at the start of the year, what interest has been earned on your investment? A. 6.54% B. 65.4% C. 7.00% 100% D. 70.00%

2. A property investor receives rental payments of $1900 at the start of each month for five years. If the required rate of return is 7.2% per annum, compounded monthly, what is the value of the property investment today? A. $83 067.50 B. $90 092.50 C. $95 498.05 0% D. $96 071.04

3. What is the current price of an existing debenture with a face value of $1000 that pays a fixed coupon of 8.4% per annum, compounded annually, and maturing in five years? Current yields in the market are 6.6% per annum. A. $941.65 B. $999.96 C. $1016.26 100% D. $1049.54

4. If you invest $13 500 for 18 months at 6.9% per annum simple interest, what is the value of your investment at the end of the 18 months? A. $14 431.50 B. $14 897.25 100% C. $21 647.25 D. $22 815.00

5. If the interest rate is 7.4% per annum, compounding quarterly, what is the future value of a six-year ordinary annuity with quarterly payments of $4000? A. $28 903.12 B. $85 938.40 C. $62 647.89 D. $103 126.09 100%

6. Where a company wants to guarantee all of its issue of commercial paper, it can arrange for it to be: A. sold by tender B. underwritten 100% C. sold by tap D. sold with a face value less than $10 000

7. The major banks lend unsecured short-term funds in the following three basic ways: A. overdraft, bill financing, commercial paper B. overdraft, bill financing, fully drawn advances C. overdraft, commercial paper, cash advances D. commercial paper, negotiable certificates of deposit, overdraft 0%

8. When a company has a deal with a bank lender that allows access to short-term funds, this is called: A. a debt facility B. a credit facility 100% C. a debt provision D. a liability provision

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9. Most agreements involving factoring of accounts receivable are made on a _______ basis. A. non-recourse B. notification 100% C. recourse D. non-notification

10. A company has directly placed an issue of commercial paper that has a maturity of 90 days, with a face value of $100 000 yielding 8.25% per annum. What amount would the company raise on the issue? A. $83 096.19 B. $91 750.00 C. $97 965.75 D. $98 006.31 100%

11. A company issues a long-term debt security with specified interest payments and fixed charges over unpledged assets. What type of security has been issued? A. Subordinated debt B. Unsecured notes C. Commercial mortgage D. Debenture 100%

12. What is the current price of a debenture with a $500 000 face value, a coupon rate of 9.5% paid semi-annually, six years remaining to maturity and market interest rates increased to 14%? A. $320 149.12 B. $401 613.48 C. $410 644.78 100% D. $688 638.80

13. The market price of previously issued bonds is often different from face value because: A. the coupon rate has altered B. the maturity date has altered C. the market rate of interest has altered 100% D. previously issued bonds sell at a discount to new bonds

14. A $1000 face value bond, with coupon rate of 9% paid annually, has six years to maturity. If bonds of similar risk are currently earning 11%, what is the current price of the bond? A. $915.39 B. $1000 C. $1089.72 D. None of the given answers. 0%

15. A company can borrow from a bank at a margin to the bank's base rate. All of the following affect this margin EXCEPT: A. the credit risk of the company B. the term of the loan C. the term structure of interest rates 100% D. the loan repayment schedule

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1. A bank bill with a face value of $500 000 and 90 days to maturity is purchased with a yield to maturity of 6.92% per annum. After the bill has been held for 28 days, it is sold at a yield of 6.78% per annum. What is the holding period yield for the holder of the note?

Student Response Value Correct Answer FeedbackA. 3.23% per annum B. 7.11% per annum C. 7.15% per annum 100% D. 7.51% per annum

Score: 1/1

2. When a company discounts a commercial bill, this means the company:

Student Response Value Correct Answer Feedback A. borrows funds 100% B. buys a commercial bill C. lends surplus funds D. invests in commercial bills

Score: 1/1

3. A property investor receives rental payments of $1900 at the start of each month for five years. If the required rate of return is 7.2% per annum, compounded monthly, what is the value of the property investment today?

Student Response Value Correct Answer FeedbackA. $83 067.50 B. $90 092.50 C. $95 498.05 D. $96 071.04 100%

Score: 1/1

4. What is the present value of $1 million payable in 90 days at 8.00% per annum simple interest?

Student Response Value Correct Answer FeedbackA. $835 240.27 B. $974 372.66 C. $980 655.56 100% D. $1 002 747.25

Score: 1/1

5. What is the current price of an existing debenture with a face value of $1000 that pays a fixed coupon of 8.4% per annum, compounded annually, and maturing in five years? Current yields in the market are 6.6% per annum.

Student Response Value Correct Answer FeedbackA. $941.65

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B. $999.96 C. $1016.26 100% D. $1049.54

Score: 1/1

6. A company is offered credit terms of 2/10 n/40, but decides to forgo the cash discount and pay on the 45th day. What is the company's cost of forgoing the cash discount?

Student Response Value Correct Answer FeedbackA. 18.6% B. 21.28% 100% C. 24.83% D. None of the given answers.

Score: 1/1

7. If a company has good credit standing with a bank, it will be charged ______ interest rate margin than/as a company without an established record.

Student Response Value Correct Answer FeedbackA. a higher B. a lower 100% C. a much higher D. the same

Score: 1/1

8. Which maturity date is NOT likely for a bank bill?

Student Response Value Correct Answer FeedbackA. 30 days B. 90 days C. 180 days D. 360 days 100%

Score: 1/1

9. A company is likely to issue a bank bill if it wants:

Student Response Value Correct Answer FeedbackA. long-term financing B. to spread its interest payments over the medium term C. short-term financing 100% D. to invest medium-term funds

Score: 1/1

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10. In relation to a bank bill, endorsement means:

Student Response Value Correct Answer FeedbackA. that the acceptor and endorser make an agreement as to who is liable for the repayment of the face value to the final holder of the bill B. if the acceptor cannot repay the face value to the holder at maturity, it must draw a bill to meet its obligations C. the endorser has a contingent liability when the bill matures 100% D. the drawer agrees to pay an additional fee to the acceptor for guaranteeing the repayment

Score: 1/1

11. The lender who registers a mortgage as a security for a loan is the:

Student Response Value Correct Answer FeedbackA. mortgagor B. mortgagee 100% C. mortgager D. mortgage

Score: 1/1

12. A security backed by real estate is a/an:

Student Response Value Correct Answer FeedbackA. debenture B. income bond C. mortgage bond 100% D. fixed-charge debenture

Score: 1/1

13. When a company defaults on interest payments for a debenture, the floating charge is said to ______ a fixed charge.

Student Response Value Correct Answer FeedbackA. transform into B. crystallise into C. originate as D. adjust to 0%

Score: 0/1

14. A debenture is a/an:

Student Response Value Correct Answer FeedbackA. unsecured bond that only best-name corporate borrowers can issue

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B. legal document stating the restrictive covenants on the loan C. bond secured by a charge over the assets of the issuer 100% D. corporate bond with a credit enhancement

Score: 1/1

15. One of the advantages of a prime rate set by a financial institution is that it is less likely to be affected by:

Student Response Value Correct Answer FeedbackA. changes in the bank bill swap rate B. short-term market illiquidity 100% C. short-term credit fluctuations D. long-term credit fluctuations

Score: 1/1

1. If you invest _______ to earn simple interest of 6.8% per year, you will receive $12 375 at the end of two years.

Student Response Value Correct Answer FeedbackA. $4759.62 B. $5156.25 C. $9728.77 D. $10 893.49 100%

Score: 1/1

2. What is the present value of the following cash flow stream, discounted at 6.5% per annum, compounded monthly?Year 1: $1000; Year 2: $1500; Year 3: $2000; Year 4: $2500

Student Response Value Correct Answer Feedback A. $5844.58 100% B. $5863.11 C. $5874.79 D. $5986.23

Score: 1/1

3. If you are saving for an overseas trip and put $400 every month into an account paying 6.8% per annum, compounding monthly, how much will you have at the end of 3.25 years?

Student Response Value Correct Answer FeedbackA. $5014.43 B. $16 907.41 C. $17 001.84 D. $17 403.22 100%

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Score: 1/1

4. What is the simple annualised interest rate on a company transaction to raise $100 000 financing by drawing a bank bill with a face value of $104 000, payable in 120 days?

Student Response Value Correct Answer FeedbackA. 4% B. 12% C. 12.17% 100% D. 12.67%

Score: 1/1

5. A finite stream of regular cash flows over a given period is known as a/an:

Student Response Value Correct Answer FeedbackA. perpetuity B. annuity 100% C. debenture D. allowance

Score: 1/1

6. The role of a lead manager for a promissory note issuance program is to:

Student Response Value Correct Answer FeedbackA. provide the funds to the issuer B. act as an arranger of the debt issue C. act as an underwriting syndicate and purchase paper not taken up by the market 0% D. provide a supporting guarantee for the issue

Score: 0/1

7. One of the advantages to the corporation of an underwriting syndicate for the issue of promissory notes is:

Student Response Value Correct Answer FeedbackA. they approve the prospectus before distribution to the public B. the syndicate submits a combined bid for purchase that the corporation compares with other bids

C. the syndicate monitors and coordinates the actions of the different underwriters

D. the underwriting commitment gives the corporation access to a line of credit extending beyond the life of the promissory note 100%

Score: 1/1

8. For a commercial bill, the interest rate is quoted as a/an:

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Student Response Value Correct Answer FeedbackA. annual percentage rate B. compounded annual rate 0% C. effective rate D. holding period yield

Score: 0/1

9. ________ is a short-term, unsecured discount note issued by corporate borrowers of high credit standing. The major banks generally issue these notes on their behalf.

Student Response Value Correct Answer FeedbackA. A line of credit B. Commercial paper 100% C. A revolving line of credit D. A fully drawn advance

Score: 1/1

10. The _______ is the party that lends the funds in a commercial bill transaction.

Student Response Value Correct Answer FeedbackA. acceptor B. discounter 100% C. drawer D. endorser

Score: 1/1

11. All of the following are examples of long-term debt instruments EXCEPT:

Student Response Value Correct Answer FeedbackA. term loans B. debentures C. promissory notes 100% D. bonds

Score: 1/1

12. The type of lease where the costs of ownership and operation are borne by the lessee, who agrees to make a residual payment at the end of the lease period, is a/an:

Student Response Value Correct Answer FeedbackA. direct lease B. financial lease 100% C. operating lease D. leveraged lease

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Score: 1/1

13. A company has two outstanding bonds with the same features, apart from their coupon. Bond A has a coupon of 5%, while bond B has a coupon of 8%. If the market interest rate changes by 10%:

Student Response Value Correct Answer Feedback A. bond A will have the greater change in price 100% B. bond B will have the greater change in price C. the price of the bonds will not alter D. the price of the bonds will change by the same amount

Score: 1/1

14. Bonds are:

Student Response Value Correct Answer FeedbackA. a type of equity financing B. a short-term financial arrangement with periodic interest payments C. a debt instrument issued at discount with interest and principal repaid at maturity


Score: 1/1

15. The main longer-term finance provided by financial intermediaries is:

Student Response Value Correct Answer FeedbackA. certificates of deposit B. commercial paper C. corporate bonds D. term loans 100%

Score: 1/1

1. Calculate the effective annual interest rate if your bank quotes you 10% per annum, compounded quarterly.

Student Response Value Correct Answer FeedbackA. 14.01% B. 10.38% 100% C. 10% D. 2.50%

Score: 1/1

2. The present value of an ordinary annuity with equal monthly payments of $300 over the next four years, assuming market interest rates are 12% per annum, is:

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Student Response Value Correct Answer FeedbackA. $911.20 B. $1170.59 C. $11 392.19 100% D. $18 366.78

Score: 1/1

3. Calculate the effective annual interest rate if you are quoted 8% per annum, compounded half yearly.

Student Response Value Correct Answer FeedbackA. 8.27% B. 8.16% 100% C. 8.0% D. 4.0%

Score: 1/1

4. An $8000 bank deposit earning compound interest of 8.21% per annum grows to _______ in 5.25 years.

Student Response Value Correct Answer FeedbackA. $11 284.00 B. $12 058.14 C. $12 105.81 100% D. $16 019.15

Score: 1/1

5. If you receive $10 000 back as principal and interest at the end of two years for an initial investment of $9127 at the start of the term, what is the yield on your investment?

Student Response Value Correct Answer FeedbackA. 4.37% per annum B. 4.78% per annum 100% C. 8.73% per annum D. 9.57% per annum

Score: 1/1

6. A major advantage of a bill financing facility is that it:

Student Response Value Correct Answer FeedbackA. lowers the acceptor's fees for a bank bill B. lowers the drawer's cost in drawing up the bill C. allows businesses to access financing at a lower cost than overdrafts 100% D. lowers the discounter's fee for taking on risks associated with the bill

Score: 1/1

7. Most agreements involving factoring of accounts receivable are made on a _______ basis.

Student Response Value Correct Answer FeedbackA. non-recourse B. notification 100% C. recourse

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D. non-notification

Score: 1/1

8. Compared with bill financing, commercial paper financing offers a large company:

Student Response Value Correct Answer FeedbackA. higher costs because of the need for collateral B. higher costs owing to the acceptance fee involved C. lower costs owing to no contingent liability when sold on 100% D. lower costs owing to lower bank fees

Score: 1/1

9. The interest rate charged on an unsecured short-term loan to a company is generally ________ the interest rate on a secured loan.

Student Response Value Correct Answer FeedbackA. lower than B. the same as C. higher than 100% D. unrelated to

Score: 1/1


Student Response Value Correct Answer FeedbackA. long-term financing B. to spread its interest payments over the medium term C. short-term financing D. to invest medium-term funds 0%

Score: 0/1

11. When a lender includes conditions in a loan agreement to protect its loan, these are known as:

Student Response Value Correct Answer FeedbackA. loan agreements B. loan covenants 100% C. loan terms D. loan actions

Score: 1/1

12. A term loan is:

Student Response Value Correct Answer FeedbackA. a bill issued to finance a specific trade transaction B. a bill issued to raise funds for general purposes C. a flexible funding arrangement for companies D. when funds are borrowed for a set period 100%

Score: 1/1

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13. The type of loan where a company pays periodic interest payments over its term and the principal at maturity is called:

Student Response Value Correct Answer FeedbackA. amortised B. a debit foncier C. deferred payment D. interest-only 0%

Score: 0/1

14. ________ has generally no charge over the issuing company's unpledged assets.

Student Response Value Correct Answer FeedbackA. A debenture B. A subordinated debenture C. A floating charge debenture D. An unsecured note 100%

Score: 1/1

15. Which of the following best describes a fully amortised term loan?

Student Response Value Correct Answer FeedbackA. An interest-only loan with principal repayable at maturity B. Periodic repayments, including interest and principal reduction 100% C. Interest repayments on the loan are fixed for the period of the loan D. A 'low-start' loan whose repayments are increased over the term

1. The present value of an annuity of $11 000, received at the end of every year for ten years, where the required rate of return is 5.6% per annum, compounded annually, is:


Score: 1/1



Score: 1/1

3.

2010 Sem1 Quiz3 20

When a company discounts a commercial bill, this means the company:


Score: 1/1

4. The main difference between an annuity and an annuity due lies in the:

Student Response Value Correct Answer FeedbackA. number of payments B. time of the first payment 100% C. interest rate D. frequency of payments

Score: 1/1

5. An investor plans to save $1000 per year for the next ten years as a retirement fund, and expects to earn 8.4% per annum, compounded monthly over the period, on all invested funds. How much will the investor have at the end of ten years?

Student Response Value Correct Answer Feedback A. $187 085.48 100% B. $296 035.24 C. $126 882.77 D. $153 178.10

Score: 1/1

6. Which of the following statements about bank bills is INCORRECT?

Student Response Value Correct Answer FeedbackA. The interest rate on a bank bill is generally higher than on a bank overdraft. B. The interest rate on a bank bill is generally lower than the yield on a Treasury note. 100% C. The interest rate on a bank overdraft is generally higher than the yield on a Treasury note.


Score: 1/1

7. Which one of the following statements is true?

Student Response Value Correct Answer FeedbackA. As a promissory note is a one-name paper, only the buyer is required to endorse it.

B. If a bank agrees to accept it, a corporation can issue a promissory note.

2010 Sem1 Quiz3 21

C. Usually, initial buyers of promissory notes hold them until maturity. 0% D. Typically, a promissory note will be issued for 90 days.

Score: 0/1

8. Upon maturity, the final holder of the bill approaches the _________ for payment.

Student Response Value Correct Answer FeedbackA. drawer B. acceptor 100% C. endorser D. discounter

Score: 1/1

9. Which of the following rates serves as a reference interest rate in the United Kingdom?

Student Response Value Correct Answer FeedbackA. BBSW B. LIBOR 100% C. USCP D. SIBOR

Score: 1/1

10. When compared with bank bills, commercial paper has the advantage:

Student Response Value Correct Answer FeedbackA. that no interest is paid until maturity, unlike for a bank bill B. that a holder of commercial paper has no contingent liability when selling in the money markets

C. that an issue of commercial paper often has a rollover facility attached, unlike for bank bills 0%


Score: 0/1

11. Bonds are:



Score: 1/1

2010 Sem1 Quiz3 22



Score: 1/1

13. When the coupon rate of a bond is equal to the current market interest rates, a bond will sell at:

Student Response Value Correct Answer FeedbackA. discount B. par 100% C. premium D. book value

Score: 1/1

14. Which of the following statements is correct?

Student Response Value Correct Answer FeedbackA. Short-term debt instruments are more volatile in price than long-term instruments.

B. Coupon rates are generally fixed when the bond is issued. C. Bond prices and market interest rates move together. D. The higher the coupon of a bond, the lower its price. 0%

Score: 0/1

15. Which of the following is NOT usually an example of restrictive debt covenants?

Student Response Value Correct Answer FeedbackA. Limitations on additional borrowing B. Constraints on disposal of non-current assets C. Minimum levels of cash flow 0% D. Supplying the creditors with annual, audited financial statements

Score: 0/1

1. An $8000 bank deposit earning compound interest of 8.21% per annum grows to _______ in 5.25 years.

Student Response Value Correct Answer FeedbackA. $11 284.00 B. $12 058.14

2010 Sem1 Quiz3 23

C. $12 105.81 100% D. $16 019.15

Score: 1/1

2. A 90-day promissory note with a face value of $500 000 is issued at a yield of 7.789% per annum. Calculate its price.


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Score: 1/1

4. If the effective annual interest rate is known to be 16.0% on a debt that has monthly payments, what is the annual percentage rate?

Student Response Value Correct Answer FeedbackA. 16.00% B. 14.93% C. 12.45% D. 1.33% 0%

Score: 0/1

5. If you invest $13 500 for 18 months at 6.9% per annum simple interest, what is the value of your

at the end of the 18 months?

Student Response Value Correct Answer FeedbackA. $14 431.50 B. $14 897.25 100% C. $21 647.25 D. $22 815.00

Score: 1/1

2010 Sem1 Quiz3 24

6. What is a bill of exchange either accepted or endorsed by a bank called?

Student Response Value Correct Answer FeedbackA. A commercial bill B. A bank bill 100% C. A trade bill D. A negotiable bill

Score: 1/1


Student Response Value Correct Answer FeedbackA. 18.6% B. 21.28% C. 24.83% 0% D. None of the given answers.

Score: 0/1

8. As an alternative to issuing a commercial bill for short-term financing, corporations with an excellent credit standing may:

Student Response Value Correct Answer FeedbackA. buy commercial paper B. issue commercial paper100% C. issue preference shares D. issue convertible notes

Score: 1/1




Score: 1/1

10. Which of the following statements about bills is INCORRECT?

Student Response Value Correct Answer FeedbackA. There is an active secondary market in bank-accepted bills.

2010 Sem1 Quiz3 25

B. Once a bill has been discounted into the marketplace, the cost of funds will vary for the issuer.

C. The drawer has a liability with a bank-accepted bill to pay face value to the acceptor bank. 0%


Score: 0/1

11. The coupon interest of a bond is calculated based on its _______, and is paid periodically.

Student Response Value Correct Answer FeedbackA. market value B. book value C. face value 100% D. surrender value

Score: 1/1

12. If a company wished to structure its financing so it repaid funds borrowed only when a project had positive cash flows, it would choose a/an:

Student Response Value Correct Answer FeedbackA. fully drawn advance B. term loan C. interest-only loan D. deferred payment loan 100%

Score: 1/1

13. Which of the following is NOT an advantage of leasing from the lessor's perspective (compared with offering a straight loan)?

Student Response Value Correct Answer FeedbackA. Leasing has a relatively low default risk. B. Administration costs may be lower for a lease than for a straight loan. C. The return to the lessor may be higher than for a straight loan. 0% D. The lessor may use the funds for other investment opportunities.

Score: 0/1

14. What is the current price of a debenture with a $500 000 face value, a coupon rate of 9.5% paid semi-annually, six years remaining to maturity and market interest rates increased to 14%?

Student Response Value Correct Answer Feedback A. $320 149.12 0% B. $401 613.48 C. $410 644.78

2010 Sem1 Quiz3 26

D. $688 638.80

Score: 0/1

15. The purpose of debt covenants that ban borrowers from entering into certain types of leases is to:

Student Response Value Correct Answer FeedbackA. limit the amount of fixed-interest payments B. prevent the firm from supplying too many cars to employees C. protect the lender in their claim over pledged assets in the event of failure 0% D. protect the shareholders' claims over assets

1. If you invest $1600 for a year at 6.8% per annum simple interest, how much interest will you earn?

Student Response Value Correct Answer FeedbackA. $10.80 B. $108.00 100% C. $1088.00 D. $1708.80

Score: 1/1

2. If you invest $12 000 for 4.75 years at 7.88% per annum, with interest compounded monthly, what will your total investment be worth at the end of the period?


Score: 1/1

3. If you invest $7500 for a year at 7.4% per annum simple interest, what is the value of your investment at the end of the year?

Student Response Value Correct Answer FeedbackA. $555.00 B. $5550.00 C. $8055.00 100% D. $13 050.00

Score: 1/1

4.

2010 Sem1 Quiz3 27

You are considering an investment that will pay a lump sum of $50 000 at the end of six years and you decide that 9% per annum compounded monthly is an appropriate discount factor. What is the value of the investment in today's dollar terms?


Score: 0/1

5. If the effective annual interest rate is known to be 19.4% on a debt that has quarterly payments, what is the annual percentage rate?

Student Response Value Correct Answer FeedbackA. 19.40% B. 19.10% C. 18.13% 100% D. 18.00%

Score: 1/1

6. Where a company wants to guarantee all of its issue of commercial paper, it can arrange for it to be:

Student Response Value Correct Answer FeedbackA. sold by tender B. underwritten 100% C. sold by tap D. sold with a face value less than $10 000

Score: 1/1


Student Response Value Correct Answer FeedbackA. 18.6% B. 21.28% C. 24.83% 0% D. None of the given answers.

Score: 0/1

8. Which of the following is NOT an advantage of factoring?

Student Response Value Correct Answer FeedbackA. Known cash flows are generated. B. Accounts receivable is turned into cash without delay. C. The credit and collection department of a company may be eliminated.

2010 Sem1 Quiz3 28

D. The cost of financing is relatively high. 100%

Score: 1/1




Score: 1/1



Score: 1/1


Student Response Value Correct Answer FeedbackA. certificates of deposit B. commercial paper C. corporate bonds 0% D. term loans

Score: 0/1

12. A key difference between a positive covenant and a negative covenant is, for a:

Student Response Value Correct Answer FeedbackA. positive covenant, a company must comply with restrictions on its financial structure


C. negative covenant, a company must provide annual audited financial statements 0% D. positive covenant, a company must maintain a minimum debt to gross cash flow ratio

Score: 0/1

2010 Sem1 Quiz3 29



Score: 1/1

14. When the coupon rate of a bond is below the current market interest rates, a bond will sell at:

Student Response Value Correct Answer Feedback A. discount 100% B. par C. premium D. face value

Score: 1/1

15. Which of the following is NOT usually an example of restrictive debt covenants?

Student Response Value Correct Answer FeedbackA. Limitations on additional borrowing B. Constraints on disposal of non-current assets C. Minimum levels of cash flow 0% D. Supplying the creditors with annual, audited financial statements

Score: 0/1

1. If you receive $100 000 back as principal and interest at the end of the year for an initial investment of $93 456 at the start of the year, what interest has been earned on your investment?


Score: 1/1


Student Response Value Correct Answer Feedback

2010 Sem1 Quiz3 30

A. $83 067.50 B. $90 092.50 C. $95 498.05 0% D. $96 071.04

Score: 0/1


Student Response Value Correct Answer FeedbackA. $941.65 B. $999.96 C. $1016.26 100% D. $1049.54

Score: 1/1

4. If you invest $13 500 for 18 months at 6.9% per annum simple interest, what is the value of your investment at the end of the 18 months?


Score: 1/1

5. If the interest rate is 7.4% per annum, compounding quarterly, what is the future value of a six-year ordinary annuity with quarterly payments of $4000?


Score: 1/1

6. Where a company wants to guarantee all of its issue of commercial paper, it can arrange for it to be:

Student Response Value Correct Answer FeedbackA. sold by tender B. underwritten 100% C. sold by tap D. sold with a face value less than $10 000

2010 Sem1 Quiz3 31

Score: 1/1

7. The major banks lend unsecured short-term funds in the following three basic ways:

Student Response Value Correct Answer FeedbackA. overdraft, bill financing, commercial paper B. overdraft, bill financing, fully drawn advances C. overdraft, commercial paper, cash advances D. commercial paper, negotiable certificates of deposit, overdraft 0%

Score: 0/1

8. When a company has a deal with a bank lender that allows access to short-term funds, this is called:

Student Response Value Correct Answer FeedbackA. a debt facility B. a credit facility 100% C. a debt provision D. a liability provision

Score: 1/1


Student Response Value Correct Answer FeedbackA. non-recourse B. notification 100% C. recourse D. non-notification

Score: 1/1

10. A company has directly placed an issue of commercial paper that has a maturity of 90 days, with a face value of $100 000 yielding 8.25% per annum. What amount would the company raise on the issue?


Score: 1/1

11. A company issues a long-term debt security with specified interest payments and fixed charges over unpledged assets. What type of security has been issued?


2010 Sem1 Quiz3 32

A. Subordinated debt B. Unsecured notes C. Commercial mortgage D. Debenture 100%

Score: 1/1

12. What is the current price of a debenture with a $500 000 face value, a coupon rate of 9.5% paid semi-annually, six years remaining to maturity and market interest rates increased to 14%?


Score: 1/1

13. The market price of previously issued bonds is often different from face value because:

Student Response Value Correct Answer FeedbackA. the coupon rate has altered B. the maturity date has altered C. the market rate of interest has altered 100% D. previously issued bonds sell at a discount to new bonds

Score: 1/1

14. A $1000 face value bond, with coupon rate of 9% paid annually, has six years to maturity. If bonds of similar risk are currently earning 11%, what is the current price of the bond?

Student Response Value Correct Answer FeedbackA. $915.39 B. $1000 C. $1089.72 D. None of the given answers. 0%

Score: 0/1

15. A company can borrow from a bank at a margin to the bank's base rate. All of the following affect this margin EXCEPT:

Student Response Value Correct Answer FeedbackA. the credit risk of the company B. the term of the loan C. the term structure of interest rates 100% D. the loan repayment schedule

2010 Sem1 Quiz3 33

Score: 1/1

View Attempt 1 of 1 Title: Quiz 3Started: 6 May 2010 14:18Submitted: 6 May 2010 14:35Time spent: 00:17:33

Total score: 14/15 = 93.3333% Total score adjusted by 0.0 Maximum possible score: 15



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Score: 1/1



Score: 1/1


2010 Sem1 Quiz3 34


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Score: 1/1

8. Which maturity date is NOT likely for a bank bill?

Student Response Value Correct Answer FeedbackA. 30 days B. 90 days C. 180 days D.

2010 Sem1 Quiz3 35

360 days 100%

Score: 1/1


Student Response Value Correct Answer FeedbackA. long-term financing B. to spread its interest payments over the medium term C. short-term financing 100% D. to invest medium-term funds

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Score: 1/1



Score: 1/1



Score: 1/1

13.

2010 Sem1 Quiz3 36

When a company defaults on interest payments for a debenture, the floating charge is said to ______ a fixed charge.

Student Response Value Correct Answer FeedbackA. transform into B. crystallise into C. originate as D. adjust to 0%

Score: 0/1


Student Response Value Correct Answer FeedbackA. unsecured bond that only best-name corporate borrowers can issue B. legal document stating the restrictive covenants on the loan C. bond secured by a charge over the assets of the issuer 100% D. corporate bond with a credit enhancement

Score: 1/1



Score: 1/1



Score: 1/1

2. What is the present value of the following cash flow stream, discounted at 6.5% per annum, compounded monthly?Year 1: $1000; Year 2: $1500; Year 3: $2000; Year 4: $2500

Student Response Value Correct Answer Feedback A. $5844.58 100%

2010 Sem1 Quiz3 37

B. $5863.11 C. $5874.79 D. $5986.23

Score: 1/1



Score: 1/1

4. What is the simple annualised interest rate on a company transaction to raise $100 000 financing by drawing a bank bill with a face value of $104 000, payable in 120 days?

Student Response Value Correct Answer FeedbackA. 4% B. 12% C. 12.17% 100% D. 12.67%

Score: 1/1

5. A finite stream of regular cash flows over a given period is known as a/an:

Student Response Value Correct Answer FeedbackA. perpetuity B. annuity 100% C. debenture D. allowance

Score: 1/1


Student Response Value Correct Answer FeedbackA. provide the funds to the issuer B. act as an arranger of the debt issue C. act as an underwriting syndicate and purchase paper not taken up by the market 0% D. provide a supporting guarantee for the issue

Score: 0/1

7.

2010 Sem1 Quiz3 38

One of the advantages to the corporation of an underwriting syndicate for the issue of promissory notes is:




Score: 1/1

8. For a commercial bill, the interest rate is quoted as a/an:

Student Response Value Correct Answer FeedbackA. annual percentage rate B. compounded annual rate 0% C. effective rate D. holding period yield

Score: 0/1

9. ________ is a short-term, unsecured discount note issued by corporate borrowers of high credit standing. The major banks generally issue these notes on their behalf.


Score: 1/1

10. The _______ is the party that lends the funds in a commercial bill transaction.

Student Response Value Correct Answer FeedbackA. acceptor B. discounter 100% C. drawer D. endorser

Score: 1/1

11. All of the following are examples of long-term debt instruments EXCEPT:

Student Response Value Correct Answer FeedbackA. term loans B. debentures

2010 Sem1 Quiz3 39

C. promissory notes 100% D. bonds

Score: 1/1


Student Response Value Correct Answer FeedbackA. direct lease B. financial lease 100% C. operating lease D. leveraged lease

Score: 1/1



Score: 1/1

14. Bonds are:



Score: 1/1


Student Response Value Correct Answer FeedbackA. certificates of deposit B. commercial paper C. corporate bonds D. term loans 100%

Score: 1/1

2010 Sem1 Quiz3 40

1. What is the current price of an existing Treasury bond that pays a fixed coupon of 6.4% per annum per $100 face value, compounding half-yearly, and maturing in four years? Current market yields are 6.8% per annum.

Student Response Value Correct Answer FeedbackA. $22.0888 B. $44.1775 C. $76.5307 D. $98.6195 100%

Score: 1/1

2. A company invests its surplus funds by buying a commercial bill with a face value of $100 000, at a current yield to maturity of 7.35% per annum and 120 days to maturity. After 45 days, the bill is sold at a yield of 6.84% per annum. What rate of return did the company earn on the bill?


Score: 1/1

3. You are considering an investment that will pay a lump sum of $50 000 at the end of six years and you decide that 9% per annum compounded monthly is an appropriate discount factor. What is the value of the investment in today's dollar terms?


Score: 1/1

4. If you make an investment and agree to pay regular monthly payments of $450 at the end of the next twelve months, starting one month from today, what is the present value of this investment if the interest rate is 8.4% per annum compounded monthly?


Score: 1/1

5.

2010 Sem1 Quiz3 41

If the interest rate is 7.4% per annum, compounding quarterly, what is the future value of a six-year ordinary annuity with quarterly payments of $4000?


Score: 1/1

6. Upon maturity, the final holder of the bill approaches the _________ for payment.

Student Response Value Correct Answer FeedbackA. drawer B. acceptor 100% C. endorser D. discounter

Score: 1/1

7. As an alternative to issuing a commercial bill for short-term funds, a corporation may:

Student Response Value Correct Answer FeedbackA. buy a promissory note B. issue a convertible note0% C. use the cash advance facility of an investment bank D. issue a negotiable certificate of deposit

Score: 0/1

8. When a party endorses a bank bill, it:

Student Response Value Correct Answer FeedbackA. repays the face value of the bill to the holder at maturity B. creates a liability for payment of the bill C. provides the funds to the seller D. provides the funds to the discounter of the bill 0%

Score: 0/1

9. A revolving facility for a promissory note issue usually:

Student Response Value Correct Answer Feedback A. has a lead manager to organise the issuance 100% B. offers corporations funding for 180 days C. gives the issuer the right to cancel the program, subject to 90 days' notice D. has only an underwriter

2010 Sem1 Quiz3 42

Score: 1/1

10. Promissory notes have a decided advantage over bills in that:

Student Response Value Correct Answer Feedback A. they are liquid 0% B. an issuer of a promissory note does not incur a contingent liability C. a borrower without a strong name in the markets does not need bank endorsement

D. sole liability to repay the face value at maturity belongs to the underwriting bank(s)

Score: 0/1

11. A $1000 face value bond, with a 7.5% coupon rate paid semi-annually and maturing in five years, is currently yielding 6.4% in the market. What is the current price of the bond?

Student Response Value Correct Answer FeedbackA. $1000 B. $1045.84 C. $1046.44 100% D. $1079.45

Score: 1/1



Score: 1/1

13. The borrower who issues a mortgage with real property as collateral to the bank is the:


Score: 0/1

14. If a company wishes to finance a printing press with a five-year life, it would be advisable to finance it with a/an:

2010 Sem1 Quiz3 43

Student Response Value Correct Answer FeedbackA. overdraft B. bank bill C. commercial paper D. fully drawn advance 100%

Score: 1/1

15. Which type of financial claim is not satisfied until those of the creditors holding certain senior debts have been fully satisfied?

Student Response Value Correct Answer FeedbackA. Mortgage bonds B. Unsecured notes 0% C. Subordinated debentures D. Deferred interest debentures

Score: 0/1

1. A company invests its surplus funds by buying a commercial bill with a face value of $100 000, at a current yield to maturity of 7.35% per annum and 120 days to maturity. After 45 days, the bill is sold at a yield of 6.84% per annum. What rate of return did the company earn on the bill?


Score: 1/1



Score: 1/1


Student Response Value Correct Answer FeedbackA. $5014.43 B. $16 907.41 C. $17 001.84

2010 Sem1 Quiz3 44

D. $17 403.22 100%

Score: 1/1

4. The main difference between an annuity and an annuity due lies in the:

Student Response Value Correct Answer FeedbackA. number of payments B. time of the first payment 100% C. interest rate D. frequency of payments

Score: 1/1



Score: 1/1


Student Response Value Correct Answer FeedbackA. There is an active secondary market in bank-accepted bills. B. Once a bill has been discounted into the marketplace, the cost of funds will vary for the issuer. 100% C. The drawer has a liability with a bank-accepted bill to pay face value to the acceptor bank.


Score: 1/1


Student Response Value Correct Answer Feedback A. they are liquid 0% B. an issuer of a promissory note does not incur a contingent liability C. a borrower without a strong name in the markets does not need bank endorsement


Score: 0/1

2010 Sem1 Quiz3 45

8. One of the advantages to the corporation of an underwriting syndicate for the issue of promissory notes is:




Score: 1/1

9. A company has decided to issue a 120-day bank-accepted bill to raise additional funding of $250 000 to buy equipment. If the bank has agreed to discount the bill at a yield of 7.65% per annum, what will be the face value of the bill?

Student Response Value Correct Answer FeedbackA. $230 875 B. $250 000 C. $256 287.67 100% D. $312 876.71

Score: 1/1

10. Which of the following is NOT a feature of promissory notes?

Student Response Value Correct Answer Feedback A. They are issued at discount to face value. 0% B. A typical P-note facility issue program is a revolving facility. C. A company may pay an additional fee to the underwriter for endorsing the issue. D. Only the largest and most creditworthy corporations issue them.

Score: 0/1



Score: 1/1

12. All of the following affect interest rates charged on term loans EXCEPT:

2010 Sem1 Quiz3 46

Student Response Value Correct Answer FeedbackA. default risk B. the maturity 0% C. the repayment schedule D. refinancing risk

Score: 0/1

13. Long-term debt can be categorised as financing with an initial maturity:

Student Response Value Correct Answer FeedbackA. over 180 days and less than a year B. between 1 and 3 years C. over 1 year 100% D. between 3 and 12 years

Score: 1/1

14. A company borrows $125 000 from a bank at 7.2% per annum to be amortised over six years. The monthly instalment is:

Student Response Value Correct Answer FeedbackA. $1861.11 B. $2143.15 100% C. $7274.21 D. $26 386.61

Score: 1/1

15. If the rates on shorter -term -to maturity deposits are higher than those of longer term deposits, it is likely that the costs for the longer term financing for a company are:

Student Response Value Correct Answer FeedbackA. higher B. lower 100% C. the same D. not related

Score: 1/1

1. The idea of compound interest refers to:

Student Response Value Correct Answer FeedbackA. the payment of interest on previously earned interest B. investing for multiple periods in one year 0% C. earning interest only on the initial investment D. changing interest rates during an investment

2010 Sem1 Quiz3 47

Score: 0/1

2. The market convention to use a 360-day year in the financial markets applies in:

Student Response Value Correct Answer FeedbackA. the United Kingdom B. Australia C. the United Kingdom and euromarkets D. the United States and euromarkets 100%

Score: 1/1

3. When a company sells a commercial bill, this means the company:

Student Response Value Correct Answer FeedbackA. lends funds B. lends a commercial bill C. issues a commercial bill100% D. invests in a commercial bill

Score: 1/1

4. If you borrow $100 000 for 90 days with simple interest of 6.2% per annum, what is the total amount of interest paid on the loan?

Student Response Value Correct Answer Feedback A. $1528.77 100% B. $6200.00 C. $6200.00 D. $15 287.67

Score: 1/1



Score: 1/1

6. A supplier who changes its trade credit from 3/10 n/30 to 4/15 n/40 is likely to find:


2010 Sem1 Quiz3 48

A. its accounts receivable decrease B. its risk of bad debts reduces 0% C. its accounts receivable increase D. a decrease in sales

Score: 0/1



Score: 1/1

8. When issuing commercial paper, it is important for a company to have:

Student Response Value Correct Answer FeedbackA. a party to act as an acceptor and guarantee payment B. collateral to attach to the issue C. a well-established reputation in the markets 100% D. investors organised by the investment bankers to sell the issue

Score: 1/1



Score: 1/1

10. Which of the following is NOT a feature of promissory notes?

Student Response Value Correct Answer FeedbackA. They are issued at discount to face value. B. A typical P-note facility issue program is a revolving facility. C. A company may pay an additional fee to the underwriter for endorsing the issue. 100% D. Only the largest and most creditworthy corporations issue them.

Score: 1/1

2010 Sem1 Quiz3 49

11. When illiquid assets are transformed into new asset-backed securities, the process is called:

Student Response Value Correct Answer FeedbackA. conversion B. liquidisation C. securitisation 100% D. transformation

Score: 1/1

12. Which of the following rates serves as a reference interest rate in Australia?

Student Response Value Correct Answer Feedback A. BBSW 100% B. LIBOR C. USCP D. SIBOR

Score: 1/1



Score: 1/1



Score: 0/1


Student Response Value Correct Answer FeedbackA. direct lease B. financial lease 100%

2010 Sem1 Quiz3 50

C. operating lease D. leveraged lease

Score: 1/1

1. What is the current price of a financial security that pays a fixed coupon of 10.2% per annum per $100 face value, compounding half-yearly and maturing in four years, when current yields in the market are 8.6% per annum?

Student Response Value Correct Answer Feedback A. $103.9575 100% B. $70.3185C $103.887D. $132.8295

Score: 1/1



Score: 1/1



Score: 1/1

4. Calculate the effective annual interest rate corresponding to 9.6% per annum, compounded monthly.

Student Response Value Correct Answer Feedback A. 10.03% 100% B. 9.6% C. 8.0% D. 6.9%

Score: 1/1

2010 Sem1 Quiz3 51

5. The present value of an annuity of $11 000, received at the end of every year for ten years, where the required rate of return is 5.6% per annum, compounded annually, is:


Score: 1/1

6. Which of the following statements about the issuing of a commercial bill is FALSE?

Student Response Value Correct Answer FeedbackA. They are sold at discount to face value. B. A bank may accept them. C. The drawer is the party that issues the bill. D. The discounter is the party that borrows the funds. 100%

Score: 1/1

7. The annual cost of forgoing a cash discount under the terms of sale 2/30 n/90, assuming a 365-day year is:


Score: 1/1

8. When compared with bank bills, commercial paper has the advantage:

Student Response Value Correct Answer FeedbackA. that no interest is paid until maturity, unlike for a bank bill B. that a holder of commercial paper has no contingent liability when selling in the money markets 100%

C. that an issue of commercial paper often has a rollover facility attached, unlike for bank bills


Score: 1/1

9. With regard to a rollover bill financing facility the:


2010 Sem1 Quiz3 52

A. bank agrees to sell commercial bills drawn by the borrower for unspecified amounts

B. bank agrees to sell commercial bills drawn by the borrower up to a specified limit

C. discounter agrees to sell commercial bills drawn by the borrower up to a specified limit

D. None of the given answers. 100%

Score: 1/1



Score: 1/1


Student Response Value Correct Answer FeedbackA. $1861.11 B. $2143.15 100% C. $7274.21 D. $26 386.61

Score: 1/1



Score: 1/1

13. Which of the following is NOT an example of negative debt covenants?

Student Response Value Correct Answer Feedback A. Specifying a minimum debt service cover. 0%

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B. Restrictions on amalgamation with other companies. C. Supplying creditors with annual audited reports. D. Limiting annual dividend payments to shareholders.

Score: 0/1

14. What happens to the coupon rate of a $100 face value bond that pays $7 coupon annually, if market interest rates change from 8 to 9%? The coupon rate:

Student Response Value Correct Answer FeedbackA. increases to 8% B. increases to 9% C. remains at 7% D. increases to just below 9% 0%

Score: 0/1

15. Twenty years ago, banks:

Student Response Value Correct Answer FeedbackA. could make mortgage loans to households but not to businesses B. could make loans to businesses but not make mortgage loans C. held most loans on their books until they were paid off 100% D. repackaged and sold most loans to investors

Score: 1/1

1. If the effective annual interest rate is known to be 16.0% on a debt that has monthly payments, what is the annual percentage rate?


Score: 1/1

2. If the interest rate is 6.9% per annum, compounded annually, what is the future value of a five-year ordinary annuity with yearly payments of $4000?

Student Response Value Correct Answer FeedbackA. $5584.04 B. $18 709.07 C. $22 957.10 100% D. $30 984.06

Score: 1/1

3. If the current yield on 180-day Treasury notes is 6.42% per annum, what price per $100 of face value would an investor be prepared to pay to purchase them?

2010 Sem1 Quiz3 54


Score: 0/1

4. The present value of an ordinary annuity with equal monthly payments of $300 over the next four years, assuming market interest rates are 12% per annum, is:

Student Response Value Correct Answer Feedback A. $911.20 0% B. $1170.59 C. $11 392.19 D. $18 366.78

Score: 0/1

5. What is the price today of an investment that will pay the single sum of $20 000 after three -and -a half years if the discount rate is 7.64% per annum, compounded annually?


Score: 0/1



Score: 1/1


Student Response Value Correct Answer FeedbackA. There is an active secondary market in bank-accepted bills. B. Once a bill has been discounted into the marketplace, the cost of funds will vary for the issuer. 100%

C. The drawer has a liability with a bank-accepted bill to pay face value to the acceptor bank.


Score: 1/1

8. A holder of a 180-day bill with 60 days left to maturity and a face value of $100 000 chooses to sell it into the market. If 60-day bills are currently yielding 6.8% per annum, what price will be obtained?

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Score: 1/1

9. Commercial paper is generally sold at a discount from:

Student Response Value Correct Answer FeedbackA. the prime rate B. its face value 100% C. its cost D. Treasury notes

Score: 1/1

10. The benchmark or reference rate of interest for overdrafts varies directly with:

Student Response Value Correct Answer FeedbackA. demand for funds in the bond markets B. varying demand and supply for funds in the short-term markets 100% C. varying demand and supply for funds in the long-term markets D. changing asset prices

Score: 1/1

11. A ________ is provided to a business by a financial institution and has a maturity of more than one year.

Student Response Value Correct Answer FeedbackA. debenture B. mortgage bond C. term loan 100% D. zero-coupon bond

Score: 1/1

12. Which of the following best describes a fully amortised term loan?

Student Response Value Correct Answer FeedbackA. An interest-only loan with principal repayable at maturity B. Periodic repayments, including interest and principal reduction 100% C. Interest repayments on the loan are fixed for the period of the loan D. A 'low-start' loan whose repayments are increased over the term

Score: 1/1

13. When the market interest rates decline after a bond is issued, the:

Student Response Value Correct Answer FeedbackA. face value of the bond decreases B. market value of the bond increases 100% C. market value of the bond decreases D. bond price is at a discount

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Score: 1/1

14. When the coupon rate of a bond is equal to the current market interest rates, a bond will sell at:

Student Response Value Correct Answer FeedbackA. discount B. par 100% C. premium D. book value

Score: 1/1

15. Long-term debt can be categorised as financing with an initial maturity:


Score: 1/1


Student Response Value Correct Answer Feedback A. $5584.04 0% B. $18 709.07 C. $22 957.10 D. $30 984.06

Score: 0/1



Score: 1/1


Student Response Value Correct Answer FeedbackA. $835 240.27 B. $974 372.66 C. $980 655.56 100%

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D. $1 002 747.25

Score: 1/1

4. What is the price today of an investment that will pay the single sum of $20 000 after three -and -a half years if the discount rate is 7.64% per annum, compounded annually?

Student Response Value Correct Answer FeedbackA. $2743.37 B. $15 456.89 100% C. $15 780.00 D. $16 036.48

Score: 1/1

5. What is the future value in six years of $10 000 invested today, compounding at 6.87% per annum?


Score: 1/1

6. When an issuer of commercial paper issue fails to raise the funds, this most likely means the:

Student Response Value Correct Answer FeedbackA. company is in default B. issue is underpriced C. underwriter must purchase unsold notes 100% D. issuer must establish a rollover facility for the remaining notes

Score: 1/1

7. When a company finances its short-term assets with short-term debt, this is known as the:

Student Response Value Correct Answer FeedbackA. identical principle B. equalisation theory C. corresponding principle D. matching principle 100%

Score: 1/1


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Score: 1/1

9. Which of the following statements regarding a bank bill is correct?

Student Response Value Correct Answer FeedbackA. It is not usually endorsed after it is sold for the second time in the secondary market.

B. Other financial institutions can accept bank bills. C. It may be both bank-accepted and bank-endorsed. D. A bank-accepted bill tends to trade at a slightly deeper discount than bank-endorsed bills. 0%

Score: 0/1

10. When a party endorses a bank bill, it:

Student Response Value Correct Answer FeedbackA. repays the face value of the bill to the holder at maturity B. creates a liability for payment of the bill 100% C. provides the funds to the seller D. provides the funds to the discounter of the bill

Score: 1/1

11. An unsecured note differs from a debenture in that it has:

Student Response Value Correct Answer FeedbackA. as security only unpledged assets B. as security a floating charge over assets C. as security a fixed charge over assets D. no supporting security 100%

Score: 1/1

12. Which of the following is NOT an example of negative debt covenants?

Student Response Value Correct Answer FeedbackA. Specifying a minimum debt service cover. B. Restrictions on amalgamation with other companies. C. Supplying creditors with annual audited reports. 100% D. Limiting annual dividend payments to shareholders.

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Score: 1/1

13. The value of a bond is the present value of the:

Student Response Value Correct Answer FeedbackA. dividends and coupon payments B. dividends and maturity value C. maturity value D. coupon payments and maturity value 100%

Score: 1/1

14. A ________ is provided to a business by a financial institution and has a maturity of more than one year.

Student Response Value Correct Answer FeedbackA. debenture B. mortgage bond C. term loan 100% D. zero-coupon bond

Score: 1/1


Student Response Value Correct Answer Feedback A. mortgagor 100% B. mortgagee C. mortgager D. mortgage

Score: 1/1



Score: 1/1

2. Calculate the effective annual interest rate if you are quoted 8% per annum, compounded every three months.


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A. 11.10% B. 8.24% 100% C. 8.22% D. 8.00%

Score: 1/1

3. If you receive $100 000 back as principal and interest for an investment of $92 368 that you made six months earlier, what simple rate of interest has been earned on your investment?

Student Response Value Correct Answer FeedbackA. 7.63% per annum B. 15.48% per annum 0% C. 16.16% per annum D. 16.75% per annum

Score: 0/1



Score: 1/1

5. Calculate the effective annual interest rate corresponding to 9.6% per annum, compounded monthly.

Student Response Value Correct Answer Feedback A. 10.03% 100% B. 9.6% C. 8.0% D. 6.9%

Score: 1/1

6. When issuing commercial paper, it is important for a company to have:


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Score: 1/1



Score: 1/1



Score: 1/1

9. The process of discounting a commercial bill means:

Student Response Value Correct Answer FeedbackA. a buyer for the bill will provide the financing B. a seller for the bill will provide the financing C. the borrower has a specified time in which to repay the loan D. the acceptor agrees to pay the face value of the bill to the holder at maturity 0%

Score: 0/1


Student Response Value Correct Answer FeedbackA. BBSW B. LIBOR C. USCP 0% D. SIBOR

Score: 0/1


Student Response Value Correct Answer FeedbackA. $1861.11

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B. $2143.15 100% C. $7274.21 D. $26 386.61

Score: 1/1


Student Response Value Correct Answer FeedbackA. unsecured bond that only best-name corporate borrowers can issue B. legal document stating the restrictive covenants on the loan C. bond secured by a charge over the assets of the issuer 100% D. corporate bond with a credit enhancement

Score: 1/1



Score: 1/1

14. An unsecured note differs from a debenture in that it has:

Student Response Value Correct Answer FeedbackA. as security only unpledged assets B. as security a floating charge over assets C. as security a fixed charge over assets D. no supporting security 100%

Score: 1/1

15. Which of the following is a positive loan covenant?

Student Response Value Correct Answer Feedback A. A minimum working capital ratio 100% B. A maximum gearing ratio C. A maximum level of unsecured debt D. All of the given answers.

Score: 1/1

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1. If your deposit of $30 000 becomes $30 919 at the end of 120 days, what is the annual yield earned?

Student Response Value Correct Answer FeedbackA. 9.04% B. 9.19% C. 9.23% D. 9.32% 100%

Score: 1/1

2. Calculate the effective annual interest rate if you are quoted 8% per annum, compounded every three months.


Score: 1/1



Score: 1/1

4. Calculate the effective annual interest rate if your bank quotes you 10% per annum, compounded quarterly.


Score: 1/1

5. If you receive $10 000 back as principal and interest at the end of two years for an initial investment of $9127 at the start of the term, what is the yield on your investment?

Student Response Value Correct Answer FeedbackA. 4.37% per annum B.

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4.78% per annum 100% C. 8.73% per annum D. 9.57% per annum

Score: 1/1

6. A revolving facility for a promissory note issue usually:

Student Response Value Correct Answer Feedback A. has a lead manager to organise the issuance 100% B. offers corporations funding for 180 days C. gives the issuer the right to cancel the program, subject to 90 days' notice D. has only an underwriter

Score: 1/1


Student Response Value Correct Answer FeedbackA. provide the funds to the issuer B. act as an arranger of the debt issue 100% C. act as an underwriting syndicate and purchase paper not taken up by the market

D. provide a supporting guarantee for the issue

Score: 1/1


Student Response Value Correct Answer FeedbackA. they are liquid B. an issuer of a promissory note does not incur a contingent liability 100% C. a borrower without a strong name in the markets does not need bank endorsement


Score: 1/1

9. A negotiable certificate of deposit:

Student Response Value Correct Answer FeedbackA. is a term deposit because it has a specified maturity date B. can be issued by banks to meet their operational liquidity C. is a short-term discount security D. All of the given answers. 100%

Score: 1/1

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10. A commercial paper issue where dealers bid competitively for the paper is a/an:

Student Response Value Correct Answer FeedbackA. tap issuance B. tender 100% C. offer D. proposition

Score: 1/1

11. Which of the following is NOT an advantage of leasing from the lessee's viewpoint?

Student Response Value Correct Answer FeedbackA. 100% financing B. The company's capital is not involved C. Flexible repayment scheduling D. With a net lease, costs of ownership remain with the lessee 100%

Score: 1/1

12. Compared with an amortised loan, a deferred repayment loan involves:

Student Response Value Correct Answer FeedbackA. periodic interest and principal repayments B. periodic interest and principal repayments when positive cash flows begin 100% C. periodic interest payments and principal repaid at maturity D. periodic principal payments and interest repaid at maturity

Score: 1/1

13. Compared with a company with a strong financial rating, a company with a weaker rating is likely to be charged:

Student Response Value Correct Answer Feedback A. LIBOR 0% B. LIBOR plus 10 basis points C. LIBOR plus 25 basis points D. LIBOR plus 50 basis points

Score: 0/1

14. Banks usually charge a/an _______ for any portion of a term loan that has not been drawn down.

Student Response Value Correct Answer FeedbackA. establishment fee B. service fee C. commitment fee 100%

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D. term fee

Score: 1/1

15. If a bond investor pays $1030 for an annual coupon bond with a face value of $1000, it follows that:

Student Response Value Correct Answer Feedback A. the coupon rate is higher than the current market yield 100% B. the current market yield and coupon rate are equal C. the current market yield is higher than the coupon rate D. not enough information is given to compare the coupon rate and current market yield

Score: 1/1

1. The market convention to use a 360-day year in the financial markets applies in:

Student Response Value Correct Answer FeedbackA. the United Kingdom B. Australia C. the United Kingdom and euromarkets D. the United States and euromarkets 100%

Score: 1/1

2. When will a future value calculated with a simple interest rate exceed a future value calculated with compound interest at the same rate?

Student Response Value Correct Answer Feedback A. When the interest rate exceeds 100% per annum 0% B. When the investment period exceeds 50 years C. When the initial deposit exceeds $1 billion D. This is not possible with positive interest rates

Score: 0/1

3. If you receive $100 000 back as principal and interest for an investment of $92 368 that you made six months earlier, what simple rate of interest has been earned on your investment?

Student Response Value Correct Answer FeedbackA. 7.63% per annum B. 15.48% per annum C. 16.16% per annum D. 16.75% per annum 100%

Score: 1/1

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4. If you invest $13 500 for 18 months at 6.9% per annum simple interest, what is the value of your investment at the end of the 18 months?


Score: 1/1



Score: 1/1




Score: 1/1



Score: 1/1

8. The basic feature of a/an ________ required by some banks is that it effectively raises the interest cost to the borrower for an overdraft facility.

Student Response Value Correct Answer FeedbackA. operating change restriction

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B. compensating balance 100% C. commitment fee D. annual cleanup

Score: 1/1



Score: 1/1


Student Response Value Correct Answer FeedbackA. BBSW B. LIBOR 100% C. USCP D. SIBOR

Score: 1/1



Score: 1/1

12. Corporations and governments use long-term debt financing called:

Student Response Value Correct Answer FeedbackA. retained earnings B. bonds 100% C. shares D. preferred stock

Score: 1/1

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13. A company borrows $75 000 from a bank, to be amortised over five years at 8.5% per annum. The annual instalment is:

Student Response Value Correct Answer FeedbackA. $12 657.43 B. $16 275.00 C. $19 032.43 100% D. None of the given answers.

Score: 1/1

14. For what type of lease does the lessee borrow a large part of the funds, typically in a multi-million dollar arrangement, often with a lease manager, while one or more financial institutions provide the remainder?

Student Response Value Correct Answer FeedbackA. An equity lease B. A leveraged lease 100% C. A sale and leveraged lease D. A financial lease

Score: 1/1

15. The purpose of debt covenants that ban borrowers from entering into certain types of leases is to:

Student Response Value Correct Answer Feedback A. limit the amount of fixed-interest payments 100% B. prevent the firm from supplying too many cars to employees C. protect the lender in their claim over pledged assets in the event of failure D. protect the shareholders' claims over assets

Score: 1/1

1. You are considering an investment that will pay a lump sum of $50 000 at the end of six years and you decide that 9% per annum compounded monthly is an appropriate discount factor. What is the value of the investment in today's dollar terms?


Score: 0/1 2. Calculate the effective annual interest rate if your bank quotes you 10% per annum, compounded quarterly.

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Score: 1/1 3. If the current yield on 180-day Treasury notes is 6.42% per annum, what price per $100 of face value would an investor be prepared to pay to purchase them?


Score: 1/1 4. What is the current price of an existing debenture with a face value of $1000 that pays a fixed coupon of 8.4% per annum, compounded annually, and maturing in five years? Current yields in the market are 6.6% per annum.


Score: 1/1 5. The present value of an ordinary annuity of $1000 each year for six years, assuming current market interest rates are 5.75% per annum, is:


Score: 1/1 6. In relation to a bank bill, endorsement means:

Student Response Value Correct Answer FeedbackA. that the acceptor and endorser make an agreement as to who is liable for the repayment of the face value to the final holder of the bill B. if the acceptor cannot repay the face value to the holder at maturity, it must draw a bill to meet its obligations C.

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the endorser has a contingent liability when the bill matures 100% D. the drawer agrees to pay an additional fee to the acceptor for guaranteeing the repayment

Score: 1/1 7. When issuing commercial paper, it is important for a company to have:


Score: 1/1 8. When a company provides goods to a purchaser with payment at the end of the month, this is called:

Student Response Value Correct Answer FeedbackA. factoring B. revolving credit C. trade credit 100% D. supplier credit

Score: 1/1 9. When a company has a deal with a bank lender that allows access to short-term funds, this is called:

Student Response Value Correct Answer FeedbackA. a debt facility B. a credit facility 100% C. a debt provision D. a liability provision

Score: 1/1 10. When a party endorses a bank bill, it:

Student Response Value Correct Answer FeedbackA. repays the face value of the bill to the holder at maturity B. creates a liability for payment of the bill 100% C. provides the funds to the seller D. provides the funds to the discounter of the bill

Score: 1/1 11.

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What happens to the coupon rate of a $100 face value bond that pays $7 coupon annually, if market interest rates change from 8 to 9%? The coupon rate:

Student Response Value Correct Answer FeedbackA. increases to 8% B. increases to 9% C. remains at 7% 100% D. increases to just below 9%

Score: 1/1 12. Long-term debt can be categorised as financing with an initial maturity:


Score: 1/1 13. Which of the following is NOT an example of negative debt covenants?

Student Response Value Correct Answer FeedbackA. Specifying a minimum debt service cover. B. Restrictions on amalgamation with other companies. C. Supplying creditors with annual audited reports. 100% D. Limiting annual dividend payments to shareholders.

Score: 1/1 14. Which of the following is NOT usually an example of restrictive debt covenants?

Student Response Value Correct Answer FeedbackA. Limitations on additional borrowing B. Constraints on disposal of non-current assets C. Minimum levels of cash flow D. Supplying the creditors with annual, audited financial statements 100%

Score: 1/1 15. The coupon interest of a bond is calculated based on its _______, and is paid periodically.

Student Response Value Correct Answer FeedbackA. market value B. book value C. face value 100% D. surrender value

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Score: 1/1

1. If your investment of $5000 with the bank carries a compound interest of 8.75% per annum, the value of your investment at the end of three years is:




Score: 1/1 3. If you invest $12 000 for 4.75 years at 7.88% per annum, with interest compounded monthly, what will your total investment be worth at the end of the period?


Score: 1/1 4. What is the future value in six years of $10 000 invested today, compounding at 6.87% per annum?


Score: 1/1 5. If the effective annual interest rate is known to be 19.4% on a debt that has quarterly payments, what is the annual percentage rate?

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Score: 1/1 6. Which of the following statements about the issuing of a commercial bill is FALSE?

Student Response Value Correct Answer FeedbackA. They are sold at discount to face value. B. A bank may accept them. C. The drawer is the party that issues the bill. D. The discounter is the party that borrows the funds. 100%

Score: 1/1 7. ________ is a short-term, unsecured discount note issued by corporate borrowers of high credit standing. The major banks generally issue these notes on their behalf.


Score: 1/1 8. Which of the following statements about bank bills is INCORRECT?

Student Response Value Correct Answer FeedbackA. The interest rate on a bank bill is generally higher than on a bank overdraft. B. The interest rate on a bank bill is generally lower than the yield on a Treasury note. 100% C. The interest rate on a bank overdraft is generally higher than the yield on a Treasury note.


Score: 1/1 9. The ________ is the benchmark rate of interest charged on loans to a business borrower by a bank.

Student Response Value Correct Answer Feedback A. reference rate 100% B. commercial paper rate C. Treasury rate

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D. overdraft rate

Score: 1/1 10. When a business wants to smooth out the timing of its monthly mismatch between cash inflows and outflows and day-to-day working capital requirements, it usually:

Student Response Value Correct Answer FeedbackA. issues bank bills B. arranges an overdraft facility 100% C. issues a debenture D. issues commercial paper

Score: 1/1 11. Which of the following types of bond generally has the lowest interest rate?

Student Response Value Correct Answer Feedback A. Treasury bonds 100% B. Corporate BAA bonds C. Semi-government bonds D. Corporate ABB bonds

Score: 1/1 12. The price of a bond with a fixed coupon has a/an _______ relationship with the market interest rates.

Student Response Value Correct Answer FeedbackA. constant B. linear C. varying D. inverse 100%

Score: 1/1 13. All of the following are examples of long-term debt instruments EXCEPT:

Student Response Value Correct Answer FeedbackA. term loans B. debentures C. promissory notes 100% D. bonds

Score: 1/1 14. A key difference between a positive covenant and a negative covenant is, for a:


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A. positive covenant, a company must comply with restrictions on its financial structure


C. negative covenant, a company must provide annual audited financial statements

D. positive covenant, a company must maintain a minimum debt to gross cash flow ratio 100%

Score: 1/1 15. A company can borrow from a bank at a margin to the bank's base rate. All of the following affect this margin EXCEPT:


Score: 1/1 1. A property investor receives rental payments of $1900 at the start of each month for five years. If the required rate of return is 7.2% per annum, compounded monthly, what is the value of the property investment today?


Score: 1/1 2. If you invest $1600 for a year at 6.8% per annum simple interest, how much interest will you earn?


Score: 1/1 3. If you invest $13 500 for 18 months at 6.9% per annum simple interest, what is the value of your investment at the end of the 18 months?

Student Response Value Correct Answer FeedbackA. $14 431.50 B. $14 897.25 100% C. $21 647.25

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D. $22 815.00



Score: 1/1 5. The present value of an ordinary annuity of $1000 each year for six years, assuming current market interest rates are 5.75% per annum, is:


Score: 1/1 6. With regard to a rollover bill financing facility the:

Student Response Value Correct Answer FeedbackA. bank agrees to sell commercial bills drawn by the borrower for unspecified amounts

B. bank agrees to sell commercial bills drawn by the borrower up to a specified limit

C. discounter agrees to sell commercial bills drawn by the borrower up to a specified limit

D. None of the given answers. 100%

Score: 1/1 7. The ________ is the benchmark rate of interest charged on loans to a business borrower by a bank.

Student Response Value Correct Answer Feedback A. reference rate 100% B. commercial paper rate C. Treasury rate D. overdraft rate

Score: 1/1 8.

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When a company finances its short-term assets with short-term debt, this is known as the:

Student Response Value Correct Answer FeedbackA. identical principle B. equalisation theory C. corresponding principle D. matching principle 100%

Score: 1/1 9. Compared with bill financing, commercial paper financing offers a large company:


Score: 1/1 10. In relation to a commercial bill, the acceptance fee is the:

Student Response Value Correct Answer FeedbackA. discounter's fee for taking on the risks associated with discounting the bill B. fee for drawing up the bill C. fee for taking the liability for paying the holder at maturity 100% D. drawer's fee for taking on the risks associated with drawing the bill

Score: 1/1 11. A $1000 face value bond, with a 7.5% coupon rate paid semi-annually and maturing in five years, is currently yielding 6.4% in the market. What is the current price of the bond?

Student Response Value Correct Answer FeedbackA. $1000 B. $1045.84 C. $1046.44 100% D. $1079.45

Score: 1/1 12. All of the following are examples of long-term debt instruments EXCEPT:

Student Response Value Correct Answer FeedbackA. term loans B. debentures C. promissory notes 100%

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D. bonds

Score: 1/1 13. Which of the following statements about 'net' finance leases is incorrect?

Student Response Value Correct Answer FeedbackA. The lessor will be responsible for the periodic maintenance of the asset. B. At the end of the lease period, the company will be required to make a residual payment.

C. Upon payment of the residual amount, ownership of the asset transfers to the company.

D. The lessor's role is one of financing, while the lessee makes regular rental payments. 0%

Score: 0/1 14. A company can borrow from a bank at a margin to the bank's base rate. All of the following affect this margin EXCEPT:


Score: 1/1 15. For what type of lease does the lessee borrow a large part of the funds, typically in a multi-million dollar arrangement, often with a lease manager, while one or more financial institutions provide the remainder?

Student Response Value Correct Answer FeedbackA. An equity lease B. A leveraged lease 100% C. A sale and leveraged lease D. A financial lease

Score: 1/1

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2010 Sem1 QUIZ3

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