Question 1

Issuers of commercial paper can be divided into finance companies and industrial or utility firms.

Accepted Answer

A) True 
 B)False

Question 2

Laura's Book Shoppe is going to borrow $50,000 for 90 days at an annual rate of 9%.The amount of interest owing in 90 days will be:

Accepted Answer

A)  $4,500.00 
B)  $1,109.59 
C)  $1,225.00 
D)  $1,009.59 
A)  $4,500.00 
B)  $1,109.59 
C)  $1,225.00 
D)  $1,009.59

Question 3

Compensating balances represent unfair hidden costs of borrowing.

Accepted Answer

A) True 
 B)False

Question 4

The lender's primary concern is whether the borrower's capacity to generate receivables is sufficient to liquidate the loan as it comes due.

Accepted Answer

A) True 
 B)False

Question 5

The required compensating balance is usually computed as a:

Accepted Answer

A)  percentage of customer loans outstanding. 
B)  factor of accounts receivable. 
C)  the bank's commitment to LIBOR. 
D)  pledge of inventory value. 
A)  percentage of customer loans outstanding. 
B)  factor of accounts receivable. 
C)  the bank's commitment to LIBOR. 
D)  pledge of inventory value.

Question 6

Financial managers may prefer financial futures markets in the United States to the Montreal Futures Exchange because of:

Accepted Answer

A)  political uncertainty. 
B)  the use of U.S.dollars. 
C)  Chicago is closer to Toronto than Montreal. 
D)  greater liquidity. 
A)  political uncertainty. 
B)  the use of U.S.dollars. 
C)  Chicago is closer to Toronto than Montreal. 
D)  greater liquidity.

Question 7

Accounts payable is a spontaneous source of funds that grows as the business expands.

Accepted Answer

A) True 
 B)False

Question 8

The Magic Pumpkin Limousine Company wants to purchase a car telephone system for one of its automobiles.The telephone vendor has offered to finance the $1,500 purchase over one year in 12 installments,with a total of $140 in interest to be paid on the loan.Magic Pumpkin's bank has offered to finance the purchase with an instalment loan,where $155 in interest will be repaid and payments on the loan must be made quarterly.What are the annual interest rates on these loans?

Accepted Answer

Vendor Pla

Question 9

If Analog computers can borrow at 9.5% for 3 years,what is the annual rate of interest on an $800,000 loan where a 15% compensating balance is required?

Accepted Answer

A)  11.18%. 
B)  17.27%. 
C)  9.50%. 
D)  3.16%. 
A)  11.18%. 
B)  17.27%. 
C)  9.50%. 
D)  3.16%.

Question 10

Ms.Smith borrowed $1,250 at an 11% stated rate of interest and was to pay back the installment loan in 24 monthly payments.What is her annual rate of interest?

Accepted Answer

A)  10.56% 
B)  11.60%. 
C)  18.96% 
D)  22.00% 
A)  10.56% 
B)  11.60%. 
C)  18.96% 
D)  22.00%

Question 11

Financial institution deregulation has eased competition between banks and foreign financial institutions.

Accepted Answer

A) True 
 B)False

Question 12

The sale of asset-backed securities enables the issuing firm to acquire lower-cost funds than it normally would receive from a bank loan or bond offering.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is a characteristic of commercial paper?

Accepted Answer

A)  Issued by large firms. 
B)  One-to-two year maturity. 
C)  Rates are usually above prime rates on business loans. 
D)  Issued by small firms. 
A)  Issued by large firms. 
B)  One-to-two year maturity. 
C)  Rates are usually above prime rates on business loans. 
D)  Issued by small firms.

Question 14

Securitized paper:

Accepted Answer

A)  is not part of the money market. 
B)  is off balance sheet financing. 
C)  is guaranteed by security firms. 
D)  is backed by a variety of assets. 
A)  is not part of the money market. 
B)  is off balance sheet financing. 
C)  is guaranteed by security firms. 
D)  is backed by a variety of assets.

Question 15

The cost of forgoing the discount on trade credit of 4/10,net 90 is equal to:

Accepted Answer

A)  18.25%. 
B)  19.01%. 
C)  20.52%. 
D)  12.13%. 
A)  18.25%. 
B)  19.01%. 
C)  20.52%. 
D)  12.13%.

Question 16

What are the risks in the commercial paper market?

Accepted Answer

• The possibility of default 
• The pote

Question 17

A firm has invested in corporate bonds; it may engage in a financial futures contract in order to protect itself from:

Accepted Answer

A)  declining interest rates. 
B)  rising interest rates. 
C)  inflation. 
D)  changes in hedging activities. 
A)  declining interest rates. 
B)  rising interest rates. 
C)  inflation. 
D)  changes in hedging activities.

Question 18

What is generally the largest source of short-term credit for small firms?

Accepted Answer

A)  Bank loans. 
B)  Commercial paper. 
C)  Installment loans. 
D)  Trade credit. 
A)  Bank loans. 
B)  Commercial paper. 
C)  Installment loans. 
D)  Trade credit.

Issuers of commercial paper can be divided into finance companies and industrial or utility firms.

Laura's Book Shoppe is going to borrow $50,000 for 90 days at an annual rate of 9%.The amount of interest owing in 90 days will be:

Compensating balances represent unfair hidden costs of borrowing.

The lender's primary concern is whether the borrower's capacity to generate receivables is sufficient to liquidate the loan as it comes due.

The required compensating balance is usually computed as a:

Financial managers may prefer financial futures markets in the United States to the Montreal Futures Exchange because of:

Accounts payable is a spontaneous source of funds that grows as the business expands.

If Analog computers can borrow at 9.5% for 3 years,what is the annual rate of interest on an $800,000 loan where a 15% compensating balance is required?

Ms.Smith borrowed $1,250 at an 11% stated rate of interest and was to pay back the installment loan in 24 monthly payments.What is her annual rate of interest?

Financial institution deregulation has eased competition between banks and foreign financial institutions.

The sale of asset-backed securities enables the issuing firm to acquire lower-cost funds than it normally would receive from a bank loan or bond offering.

Which of the following is a characteristic of commercial paper?

Securitized paper:

The cost of forgoing the discount on trade credit of 4/10,net 90 is equal to:

What are the risks in the commercial paper market?

A firm has invested in corporate bonds; it may engage in a financial futures contract in order to protect itself from:

What is generally the largest source of short-term credit for small firms?

The Goals and Activities of Financial Management

Review of Accounting

Financial Analysis

Financial Forecasting

Operating and Financial Leverage

Working Capital and the Financing Decision

Current Asset Management

The Time Value of Money

Valuation and Rates of Return

Cost of Capital

The Capital Budgeting Decision

Risk and Capital Budgeting

Capital Markets

Investment Banking: Public and Private Placement

Long-Term Debt and Lease Financing

Common and Preferred Stock Financing

Dividend Policy and Retained Earnings

Convertibles, Warrants and Derivatives

External Growth Through Mergers

International Financial Management

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Exam 8: Sources of Short-Term Financing

Issuers of commercial paper can be divided into finance companies and industrial or utility firms.

Laura's Book Shoppe is going to borrow $50,000 for 90 days at an annual rate of 9%.The amount of interest owing in 90 days will be:

Compensating balances represent unfair hidden costs of borrowing.

The lender's primary concern is whether the borrower's capacity to generate receivables is sufficient to liquidate the loan as it comes due.

The required compensating balance is usually computed as a:

Financial managers may prefer financial futures markets in the United States to the Montreal Futures Exchange because of:

Accounts payable is a spontaneous source of funds that grows as the business expands.

If Analog computers can borrow at 9.5% for 3 years,what is the annual rate of interest on an $800,000 loan where a 15% compensating balance is required?

Ms.Smith borrowed $1,250 at an 11% stated rate of interest and was to pay back the installment loan in 24 monthly payments.What is her annual rate of interest?

Financial institution deregulation has eased competition between banks and foreign financial institutions.

The sale of asset-backed securities enables the issuing firm to acquire lower-cost funds than it normally would receive from a bank loan or bond offering.

Which of the following is a characteristic of commercial paper?

Securitized paper:

The cost of forgoing the discount on trade credit of 4/10,net 90 is equal to:

What are the risks in the commercial paper market?

A firm has invested in corporate bonds; it may engage in a financial futures contract in order to protect itself from:

What is generally the largest source of short-term credit for small firms?

The Goals and Activities of Financial Management

Review of Accounting

Financial Analysis

Financial Forecasting

Operating and Financial Leverage

Working Capital and the Financing Decision

Current Asset Management

The Time Value of Money

Valuation and Rates of Return

Cost of Capital

The Capital Budgeting Decision

Risk and Capital Budgeting

Capital Markets

Investment Banking: Public and Private Placement

Long-Term Debt and Lease Financing

Common and Preferred Stock Financing

Dividend Policy and Retained Earnings

Convertibles, Warrants and Derivatives

External Growth Through Mergers

International Financial Management

Filters