Question 1

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

Accepted Answer

A)  drawer 
B)  acceptor 
C)  endorser 
D)  discounter 
A)  drawer 
B)  acceptor 
C)  endorser 
D)  discounter B

Question 2

Which one of the following statements regarding factoring is correct?

Accepted Answer

A)  Some banks and bank subsidiaries may provide factoring. 
B)  Under with-recourse factoring, when a customer makes a payment the factoring company passes the money on to the company minus a handling fee. 
C)  The discount charged by the factoring company is approximately equal to the rate charged on a secured overdraft loan. 
D)  With non-recourse factoring, the company cannot sell additional accounts receivable to the factoring company after the initial amount. 
A)  Some banks and bank subsidiaries may provide factoring. 
B)  Under with-recourse factoring, when a customer makes a payment the factoring company passes the money on to the company minus a handling fee. 
C)  The discount charged by the factoring company is approximately equal to the rate charged on a secured overdraft loan. 
D)  With non-recourse factoring, the company cannot sell additional accounts receivable to the factoring company after the initial amount. A

Question 3

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:

Accepted Answer

A)  issues bank bills. 
B)  arranges a bank overdraft facility. 
C)  issues a debenture. 
D)  issues commercial paper. 
A)  issues bank bills. 
B)  arranges a bank overdraft facility. 
C)  issues a debenture. 
D)  issues commercial paper. B

Question 4

Which of the following statements about bank bills is NOT correct?

Accepted Answer

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. 
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. 
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. 
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.

Question 5

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?

Accepted Answer

A)  18.6% 
B)  21.28% 
C)  24.83% 
D)  None of the given answers 
A)  18.6% 
B)  21.28% 
C)  24.83% 
D)  None of the given answers

Question 6

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

Accepted Answer

A)  A commercial bill 
B)  A bank bill 
C)  A trade bill 
D)  A negotiable bill 
A)  A commercial bill 
B)  A bank bill 
C)  A trade bill 
D)  A negotiable bill

Question 7

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

Accepted Answer

A)  annual percentage rate. 
B)  rate based on its maturity. 
C)  effective rate. 
D)  holding period yield. 
A)  annual percentage rate. 
B)  rate based on its maturity. 
C)  effective rate. 
D)  holding period yield.

Question 8

Which of the following is NOT an advantage of factoring?

Accepted Answer

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 
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

Question 9

In establishing an overdraft facility with a company,what are some of the firm-related factors a bank will consider?

Accepted Answer

A bank will consider a company's past fi

Question 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?

Accepted Answer

A)  $83 096.19 
B)  $91 750.00 
C)  $97 965.75 
D)  $98 006.31 
A)  $83 096.19 
B)  $91 750.00 
C)  $97 965.75 
D)  $98 006.31

Question 11

A facility offered by many suppliers of goods that provide for the purchase of goods with a specified period before the account must be paid for is called:

Accepted Answer

A)  supplier credit. 
B)  bank overdraft. 
C)  trade credit. 
D)  purchaser credit. 
A)  supplier credit. 
B)  bank overdraft. 
C)  trade credit. 
D)  purchaser credit.

Question 12

When a company provides goods to a purchaser with payment at the end of the month,this is called.

Accepted Answer

A)  factoring. 
B)  revolving credit. 
C)  trade credit. 
D)  supplier credit. 
A)  factoring. 
B)  revolving credit. 
C)  trade credit. 
D)  supplier credit.

Question 13

What is the discount rate of a 120-day bank bill with a face value of $100 000 and currently selling for $95 234,with a full 120 days to run?

Accepted Answer

A)  13.93% 
B)  14.50% 
C)  15.22% 
D)  16.58% 
A)  13.93% 
B)  14.50% 
C)  15.22% 
D)  16.58%

Question 14

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

Accepted Answer

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. 
D)  lower costs owing to lower bank fees. 
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. 
D)  lower costs owing to lower bank fees.

Question 15

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

Accepted Answer

A)  company is in default. 
B)  issue is underpriced. 
C)  underwriter must purchase unsold notes. 
D)  issuer must establish a rollover facility for the remaining notes. 
A)  company is in default. 
B)  issue is underpriced. 
C)  underwriter must purchase unsold notes. 
D)  issuer must establish a rollover facility for the remaining notes.

Question 16

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

Accepted Answer

A)  a higher 
B)  a lower 
C)  a much higher 
D)  the same 
A)  a higher 
B)  a lower 
C)  a much higher 
D)  the same

Question 17

With a bank-accepted bill the drawer has a secondary liability after the acceptor to pay the holder of the bill the face value of the bill at the maturity date.

Accepted Answer

A) True 
 B)False

Question 18

The ________ is the benchmark rate of interest charged on loans to a business borrower by a bank.

Accepted Answer

A)  prime rate 
B)  commercial paper rate 
C)  Treasury rate 
D)  overdraft rate 
A)  prime rate 
B)  commercial paper rate 
C)  Treasury rate 
D)  overdraft rate

Question 19

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

Accepted Answer

A)  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. 
D)  provide a supporting guarantee for the issue. 
A)  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. 
D)  provide a supporting guarantee for the issue.

Question 20

Which of the following about P-notes is incorrect?

Accepted Answer

A)  Commercial paper issued in the euromarkets uses a 360-day convention. 
B)  The credit rating of a P-note issuer needs to be investment grade. 
C)  A dealer panel is chosen on their ability to distribute the paper to the market. 
D)  If the lead manager has arranged a tender panel, then the members of the panel do not have any obligation to buy. 
A)  Commercial paper issued in the euromarkets uses a 360-day convention. 
B)  The credit rating of a P-note issuer needs to be investment grade. 
C)  A dealer panel is chosen on their ability to distribute the paper to the market. 
D)  If the lead manager has arranged a tender panel, then the members of the panel do not have any obligation to buy.

Exam 9: Short-Term Debt

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

Which one of the following statements regarding factoring is correct?

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:

Which of the following statements about bank bills is NOT correct?

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?

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

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

Which of the following is NOT an advantage of factoring?

In establishing an overdraft facility with a company,what are some of the firm-related factors a bank will consider?

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 facility offered by many suppliers of goods that provide for the purchase of goods with a specified period before the account must be paid for is called:

When a company provides goods to a purchaser with payment at the end of the month,this is called.

What is the discount rate of a 120-day bank bill with a face value of $100 000 and currently selling for $95 234,with a full 120 days to run?

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

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

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

With a bank-accepted bill the drawer has a secondary liability after the acceptor to pay the holder of the bill the face value of the bill at the maturity date.

The ________ is the benchmark rate of interest charged on loans to a business borrower by a bank.

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

Which of the following about P-notes is incorrect?

A Modern Financial System: An Overview

Commercial Banks

Non-Bank Financial Institutions

The Share Market and the Corporation

Corporations Issuing Equity in the Share Market

Investors in the Share Market

Forecasting Share Price Movements

Mathematics of Finance: An Introduction to Basic Concepts and Calculations

Medium-To-Long-Term Debt

International Debt Markets

Government Debt, monetary Policy and the Payments System

An Introduction to Interest Rate Determination and Forecasting

Interest Rate Risk

Foreign Exchange: The Structure and Operation of the Fx Market

Foreign Exchange: Factors That Influence the Exchange Rate

Foreign Exchange: Risk Identification and Management

An Introduction to Risk Management and Derivatives

Future Contracts and Forward Rate Agreements

Options

Interest Rate Swaps, Cross-Currency Swaps and Credit Default

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