Question 1

What is the effective rate of interest if the loan is a discounted loan with a 10 percent compensating balance?

Accepted Answer

The answer of What is the effective rate of interest...

Question 2

Which method of controlling pledged inventory provides the greatest degree of security to the lender?

Accepted Answer

A)  Blanket inventory liens 
B)  Overall inventory liens 
C)  Trust receipts 
D)  Warehousing 
A)  Blanket inventory liens 
B)  Overall inventory liens 
C)  Trust receipts 
D)  Warehousing D

Question 3

If you borrow $15,000 at $1,000 interest for one year, what is your effective interest cost for the following payment plans?
-Annual payment.

Accepted Answer

$1,000/$15,000 = 6.7%

Question 4

Commercial paper that is sold without the use of an actual paper certificate is known as

Accepted Answer

A)  finance paper. 
B)  dealer paper. 
C)  book-entry paper. 
D)  term paper. 
A)  finance paper. 
B)  dealer paper. 
C)  book-entry paper. 
D)  term paper.

Question 5

Monthly installment loans usually increase the effective rate of borrowing by approximately 2 times the stated rate.

Accepted Answer

A) True 
 B)False

Question 6

What is the effective rate of interest if the loan carries a simple 10 percent interest with a 20 percent compensating balance?

Accepted Answer

The answer of What is the effective rate of interest...

Question 7

Kenneth's Arrows and Bows borrow $15,000 for one year at 8 percent interest. What is the effective rate of interest if the loan is discounted?

Accepted Answer

A)  Less than 8.5 percent 
B)  More than 8.5 percent, but less than 9.5 percent 
C)  More than 9.5 percent, but less than 10.5 percent 
D)  More than 10.5 percent 
A)  Less than 8.5 percent 
B)  More than 8.5 percent, but less than 9.5 percent 
C)  More than 9.5 percent, but less than 10.5 percent 
D)  More than 10.5 percent

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

General Rent-All's officers arrange a $50,000 loan. The company is required to maintain a minimum checking account balance of 10% of the outstanding loan. This practice is called

Accepted Answer

A)  an installment loan. 
B)  a compensating balance. 
C)  a discounted loan. 
D)  a balloon payment. 
A)  an installment loan. 
B)  a compensating balance. 
C)  a discounted loan. 
D)  a balloon payment.

Question 10

Holland Construction Co. has an outstanding 180-day bank loan of $475,000 at an annual interest rate of 7.5%. The company is required to maintain a 15% compensating balance in its checking account. What is the effective interest rate on the loan? Assume the company would not normally maintain this average amount.

Accepted Answer

A)  11.2% 
B)  19.0% 
C)  22.45% 
D)  8.8% 
A)  11.2% 
B)  19.0% 
C)  22.45% 
D)  8.8%

Question 11

One major advantage of commercial paper is that it can always be "rolled over"(reissued) when it matures.

Accepted Answer

A) True 
 B)False

Question 12

Kantorovich Company normally takes 30 days to pay for its average daily credit purchases of $2,000. Its average daily sales are $3,000, and it collects accounts in 25 days. What is its net credit position? Note that a negative position implies receivables exceed payables.

Accepted Answer

A)  $15,000 
B)  $1,000 
C)  ($1,000) 
D)  ($15,000) 
A)  $15,000 
B)  $1,000 
C)  ($1,000) 
D)  ($15,000)

Question 13

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 14

The financial futures market

Accepted Answer

A)  is a place in Chicago where future stocks are traded. 
B)  allows for the delivery of financial instruments at a future point in time. 
C)  is of particular value to small investors in managing their portfolios. 
D)  two of the above. 
A)  is a place in Chicago where future stocks are traded. 
B)  allows for the delivery of financial instruments at a future point in time. 
C)  is of particular value to small investors in managing their portfolios. 
D)  two of the above.

Question 15

At historically low interest rate levels, compensating balances increase.

Accepted Answer

A) True 
 B)False

Question 16

The effective rate on a $20,000 installment loan with quarterly payments, $2,000 in interest, for 2 years is:

Accepted Answer

A)  16% 
B)  7.4% 
C)  29.5% 
D)  8.9% 
A)  16% 
B)  7.4% 
C)  29.5% 
D)  8.9%

Question 17

It is difficult to acquire a loan in US dollars outside the United States.

Accepted Answer

A) True 
 B)False

Question 18

East Coast Cleaners borrows $20,000 for 120 days and pays $400 interest. What is the effective rate of interest if the loan is discounted?

Accepted Answer

A)  Less than 5.5 percent 
B)  More than 5.5 percent but less than 6.0 percent 
C)  More than 6.0 percent but less than 6.5 percent 
D)  More than 6.5 percent 
A)  Less than 5.5 percent 
B)  More than 5.5 percent but less than 6.0 percent 
C)  More than 6.0 percent but less than 6.5 percent 
D)  More than 6.5 percent

Question 19

Bank deregulation has eased competition between commercial banks, savings and loans, brokerage houses, and new financial services companies.

Accepted Answer

A) True 
 B)False

Question 20

The London Interbank Offered Rate (LIBOR)

Accepted Answer

A)  competes with the U.S. prime rate for those companies with an international presence. 
B)  has been lower than the U.S. prime rate for at least the last decade. 
C)  is the interbank lending rate for London banks. 
D)  a and b are correct. 
A)  competes with the U.S. prime rate for those companies with an international presence. 
B)  has been lower than the U.S. prime rate for at least the last decade. 
C)  is the interbank lending rate for London banks. 
D)  a and b are correct.

What is the effective rate of interest if the loan is a discounted loan with a 10 percent compensating balance?

Which method of controlling pledged inventory provides the greatest degree of security to the lender?

If you borrow $15,000 at $1,000 interest for one year, what is your effective interest cost for the following payment plans? -Annual payment.

Commercial paper that is sold without the use of an actual paper certificate is known as

Monthly installment loans usually increase the effective rate of borrowing by approximately 2 times the stated rate.

What is the effective rate of interest if the loan carries a simple 10 percent interest with a 20 percent compensating balance?

Kenneth's Arrows and Bows borrow $15,000 for one year at 8 percent interest. What is the effective rate of interest if the loan is discounted?

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

General Rent-All's officers arrange a $50,000 loan. The company is required to maintain a minimum checking account balance of 10% of the outstanding loan. This practice is called

One major advantage of commercial paper is that it can always be "rolled over"(reissued) when it matures.

Kantorovich Company normally takes 30 days to pay for its average daily credit purchases of $2,000. Its average daily sales are $3,000, and it collects accounts in 25 days. What is its net credit position? Note that a negative position implies receivables exceed payables.

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 financial futures market

At historically low interest rate levels, compensating balances increase.

The effective rate on a $20,000 installment loan with quarterly payments, $2,000 in interest, for 2 years is:

It is difficult to acquire a loan in US dollars outside the United States.

East Coast Cleaners borrows $20,000 for 120 days and pays $400 interest. What is the effective rate of interest if the loan is discounted?

Bank deregulation has eased competition between commercial banks, savings and loans, brokerage houses, and new financial services companies.

The London Interbank Offered Rate (LIBOR)

The Goals and Functions 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

Exam 8: Sources of Short-Term Financing

What is the effective rate of interest if the loan is a discounted loan with a 10 percent compensating balance?

Which method of controlling pledged inventory provides the greatest degree of security to the lender?

If you borrow $15,000 at $1,000 interest for one year, what is your effective interest cost for the following payment plans? -Annual payment.

Commercial paper that is sold without the use of an actual paper certificate is known as

Monthly installment loans usually increase the effective rate of borrowing by approximately 2 times the stated rate.

What is the effective rate of interest if the loan carries a simple 10 percent interest with a 20 percent compensating balance?

Kenneth's Arrows and Bows borrow $15,000 for one year at 8 percent interest. What is the effective rate of interest if the loan is discounted?

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

General Rent-All's officers arrange a $50,000 loan. The company is required to maintain a minimum checking account balance of 10% of the outstanding loan. This practice is called

One major advantage of commercial paper is that it can always be "rolled over"(reissued) when it matures.

Kantorovich Company normally takes 30 days to pay for its average daily credit purchases of $2,000. Its average daily sales are $3,000, and it collects accounts in 25 days. What is its net credit position? Note that a negative position implies receivables exceed payables.

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 financial futures market

At historically low interest rate levels, compensating balances increase.

The effective rate on a $20,000 installment loan with quarterly payments, $2,000 in interest, for 2 years is:

It is difficult to acquire a loan in US dollars outside the United States.

East Coast Cleaners borrows $20,000 for 120 days and pays $400 interest. What is the effective rate of interest if the loan is discounted?

Bank deregulation has eased competition between commercial banks, savings and loans, brokerage houses, and new financial services companies.

The London Interbank Offered Rate (LIBOR)

The Goals and Functions 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