Question 1

A discounting agreement under which the discounter and the company share responsibility for managing the company's debtors is known as:

Accepted Answer

A) cooperation discounting. 
B) full service discounting. 
C) invoice discounting. 
D) debtor finance without recourse discounting. 
A) cooperation discounting. 
B) full service discounting. 
C) invoice discounting. 
D) debtor finance without recourse discounting. A

Question 2

Koppen Ltd has just raised $1 billion by an issue of converting preference shares on the following terms:  
An investor,W.Street,currently owns 500 000 Koppen Ltd CPS.The ordinary share price immediately prior to conversion is expected to be $2.00 per share.Calculate the total value of ordinary shares expected to be received by W.Street on conversion.

Accepted Answer

A) $25 000 000 
B) $12 500 000 
C) $50 000 000 
D) $5 000 000 
A) $25 000 000 
B) $12 500 000 
C) $50 000 000 
D) $5 000 000 B

Question 3

The main difference between corporate bonds and debentures is that:

Accepted Answer

A) debentures are typically unsecured. 
B) the trust deed for corporate bonds is normally less restrictive than that for debentures. 
C) debentures are placed privately with institutional investors. 
D) corporate bonds are normally for a longer term. 
A) debentures are typically unsecured. 
B) the trust deed for corporate bonds is normally less restrictive than that for debentures. 
C) debentures are placed privately with institutional investors. 
D) corporate bonds are normally for a longer term. B

Question 4

A covenant is a provision in a loan agreement to protect lenders' interests by requiring certain actions to be taken and others refrained from.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is not a role of the trustee?

Accepted Answer

A) To ensure that the borrower does not breach any of the covenants in the trust deed. 
B) The trustee has to act to protect the debenture holders in the event of any breach. 
C) The trustee has to ensure that the borrower does not breach any of the covenants in the trust deed and to act to protect the debenture holders in the event of any breach. 
D) None of the given options. 
A) To ensure that the borrower does not breach any of the covenants in the trust deed. 
B) The trustee has to act to protect the debenture holders in the event of any breach. 
C) The trustee has to ensure that the borrower does not breach any of the covenants in the trust deed and to act to protect the debenture holders in the event of any breach. 
D) None of the given options.

Question 6

A promissory note is also known as a:

Accepted Answer

A) commercial paper. 
B) floor plan paper. 
C) wholesale paper. 
D) secondary transaction paper. 
A) commercial paper. 
B) floor plan paper. 
C) wholesale paper. 
D) secondary transaction paper.

Question 7

The interbank cash rate is also known as the:

Accepted Answer

A) indicator rate. 
B) margin rate. 
C) at call rate. 
D) cash rate. 
A) indicator rate. 
B) margin rate. 
C) at call rate. 
D) cash rate.

Question 8

Koppen Ltd has just raised $1 billion by an issue of converting preference shares on the following terms:  
An investor,W.Street,currently owns 500 000 Koppen Ltd CPS.If the ordinary share price immediately prior to conversion is expected to be $2.00 per share,calculate the number of ordinary shares that W.Street expects to receive on conversion.

Accepted Answer

A) 625 000 ordinary shares. 
B) 6 250 000 ordinary shares. 
C) 12 500 000 ordinary shares. 
D) 1 250 000 ordinary shares. 
A) 625 000 ordinary shares. 
B) 6 250 000 ordinary shares. 
C) 12 500 000 ordinary shares. 
D) 1 250 000 ordinary shares.

Question 9

If a company is in financial distress,the existence of debentures and the associated trust deed can compound difficulties.Which of the following statements is unlikely to be a difficulty for a company in financial distress?

Accepted Answer

A) Publicity resulting from any actions taken by the trustee. 
B) Borrowing restrictions. 
C) Interest payments on the debentures. 
D) None of the given options. 
A) Publicity resulting from any actions taken by the trustee. 
B) Borrowing restrictions. 
C) Interest payments on the debentures. 
D) None of the given options.

Question 10

Which of the following statements is false?

Accepted Answer

A) Issuing long-term debt securities is an important way for Australian borrowers to raise funds from overseas. 
B) Governments are the main domestic issuers of long-term debt securities to the public. 
C) Most of the long-term debt securities issued by Australian borrowers are issued by governments and financial institutions rather than by non-financial corporations. 
D) None of the given options. 
A) Issuing long-term debt securities is an important way for Australian borrowers to raise funds from overseas. 
B) Governments are the main domestic issuers of long-term debt securities to the public. 
C) Most of the long-term debt securities issued by Australian borrowers are issued by governments and financial institutions rather than by non-financial corporations. 
D) None of the given options.

Question 11

The effect of increasing financial risk through borrowing is that:

Accepted Answer

A) the risk of financial distress increases. 
B) the shareholders are more assured of receiving dividends because the amount they are entitled to is lower. 
C) the variability of returns to shareholders increases. 
D) the risk of financial distress increases and the variability of returns to shareholders increases. 
A) the risk of financial distress increases. 
B) the shareholders are more assured of receiving dividends because the amount they are entitled to is lower. 
C) the variability of returns to shareholders increases. 
D) the risk of financial distress increases and the variability of returns to shareholders increases.

Question 12

If a preference share is participating,it means the share holder has voting rights.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements with regards to debentures is false?

Accepted Answer

A) Most debenture issues involve a fixed charge because a floating charge impedes the company's freedom to deal in its own assets. 
B) Debenture holders rank as unsecured creditors on the portion of the financial obligations,on a fixed-charge debenture,that is not raised through the sale of the pledged assets. 
C) The interest rates attached to a debenture issue normally remain unchanged for the life of the issue. 
D) None of the given options. 
A) Most debenture issues involve a fixed charge because a floating charge impedes the company's freedom to deal in its own assets. 
B) Debenture holders rank as unsecured creditors on the portion of the financial obligations,on a fixed-charge debenture,that is not raised through the sale of the pledged assets. 
C) The interest rates attached to a debenture issue normally remain unchanged for the life of the issue. 
D) None of the given options.

Question 14

Which of the following statements with regard to factoring is true?

Accepted Answer

A) When the customer makes payment,the money initially goes to the factor,which then passes it to the company,plus a factor charge. 
B) The discount charged by the factor is generally calculated at a rate approximately equal to the secured overdraft rate. 
C) From the factor's viewpoint,the company accelerates its cash inflow from accounts receivable. 
D) Some banks and bank subsidiaries may provide factoring. 
E) None of the given options. 
A) When the customer makes payment,the money initially goes to the factor,which then passes it to the company,plus a factor charge. 
B) The discount charged by the factor is generally calculated at a rate approximately equal to the secured overdraft rate. 
C) From the factor's viewpoint,the company accelerates its cash inflow from accounts receivable. 
D) Some banks and bank subsidiaries may provide factoring. 
E) None of the given options.

Question 15

Which of the following statements will not result in the flow of funds from cash surplus companies to companies that require cash?

Accepted Answer

A) Investment by companies in commercial bills. 
B) Investments by companies in government securities. 
C) Investment by companies in cash deposits at a bank. 
D) Investment by companies in short-term deposits at a financial institution. 
A) Investment by companies in commercial bills. 
B) Investments by companies in government securities. 
C) Investment by companies in cash deposits at a bank. 
D) Investment by companies in short-term deposits at a financial institution.

Question 16

In a bill acceptance facility:

Accepted Answer

A) the bank undertakes to accept bills drawn by the borrower up to a specified total amount. 
B) the borrower undertakes to accept bills drawn by the bank for an unspecified total amount,usually determined by demand and supply. 
C) the borrower undertakes to accept bills drawn by the bank up to a specified total amount. 
D) none of the given options. 
A) the bank undertakes to accept bills drawn by the borrower up to a specified total amount. 
B) the borrower undertakes to accept bills drawn by the bank for an unspecified total amount,usually determined by demand and supply. 
C) the borrower undertakes to accept bills drawn by the bank up to a specified total amount. 
D) none of the given options.

Question 17

Yebuzz Ltd has just raised $100 million by an issue of 10 million converting preference shares.Each CPS converts into five ordinary shares.If the ordinary share price immediately prior to conversion is $2 per share,calculate the rate of the conversion discount.

Accepted Answer

A) 0.5% 
B) 0.9% 
C) 0% 
D) 5% 
A) 0.5% 
B) 0.9% 
C) 0% 
D) 5%

Question 18

A _____________ loan is where a number of banks join together to provide what is,in effect,a term loan,with each lender having identical rights.

Accepted Answer

The answer of A _____________ loan is where a number...

Question 19

Which type of debt takes the form of loans arranged privately between two parties where the lender is usually a bank or other financial institution?

Accepted Answer

A) Covenant. 
B) Debenture. 
C) Marketable debt. 
D) Non-marketable debt. 
A) Covenant. 
B) Debenture. 
C) Marketable debt. 
D) Non-marketable debt.

Question 20

Interest rates are normally higher on unsecured notes than on debentures because:

Accepted Answer

A) debenture holders have a prior claim over company assets. 
B) debentures are a riskier form of security. 
C) unsecured notes are normally secured by a floating charge over assets. 
D) unsecured notes are normally secured by a fixed charge over an asset. 
A) debenture holders have a prior claim over company assets. 
B) debentures are a riskier form of security. 
C) unsecured notes are normally secured by a floating charge over assets. 
D) unsecured notes are normally secured by a fixed charge over an asset.

A discounting agreement under which the discounter and the company share responsibility for managing the company's debtors is known as:

The main difference between corporate bonds and debentures is that:

A covenant is a provision in a loan agreement to protect lenders' interests by requiring certain actions to be taken and others refrained from.

Which of the following statements is not a role of the trustee?

A promissory note is also known as a:

The interbank cash rate is also known as the:

If a company is in financial distress,the existence of debentures and the associated trust deed can compound difficulties.Which of the following statements is unlikely to be a difficulty for a company in financial distress?

Which of the following statements is false?

The effect of increasing financial risk through borrowing is that:

If a preference share is participating,it means the share holder has voting rights.

Which of the following statements with regards to debentures is false?

Which of the following statements with regard to factoring is true?

Which of the following statements will not result in the flow of funds from cash surplus companies to companies that require cash?

In a bill acceptance facility:

Yebuzz Ltd has just raised $100 million by an issue of 10 million converting preference shares.Each CPS converts into five ordinary shares.If the ordinary share price immediately prior to conversion is $2 per share,calculate the rate of the conversion discount.

A _____________ loan is where a number of banks join together to provide what is,in effect,a term loan,with each lender having identical rights.

Which type of debt takes the form of loans arranged privately between two parties where the lender is usually a bank or other financial institution?

Interest rates are normally higher on unsecured notes than on debentures because:

Introduction

Consumption, Investment and the Capital Market

The Time Value of Money: An Introduction to Financial Mathematics

Applying the Time Value of Money to Security Valuation

Project Evaluation: Principles and Methods

The Application of Project Evaluation Methods

Risk and Return

The Capital Market

Sources of Finance: Equity

Payout Policy

Principles of Capital Structure

Capital Structure Decisions

The Cost of Capital and Taxation Issues in Project Evaluation

Leasing and Other Equipment Finance

Capital Market Efficiency

Futures Contracts

Options and Contingent Claims

Analysis of Takeovers

International Financial Management

Management of Short-Term Assets: Inventory

Management of Short-Term Assets: Liquid Assets and Accounts Receivable

Filters

Exam 10: Sources of Finance: Debt

A discounting agreement under which the discounter and the company share responsibility for managing the company's debtors is known as:

The main difference between corporate bonds and debentures is that:

A covenant is a provision in a loan agreement to protect lenders' interests by requiring certain actions to be taken and others refrained from.

Which of the following statements is not a role of the trustee?

A promissory note is also known as a:

The interbank cash rate is also known as the:

If a company is in financial distress,the existence of debentures and the associated trust deed can compound difficulties.Which of the following statements is unlikely to be a difficulty for a company in financial distress?

Which of the following statements is false?

The effect of increasing financial risk through borrowing is that:

If a preference share is participating,it means the share holder has voting rights.

Which of the following statements with regards to debentures is false?

Which of the following statements with regard to factoring is true?

Which of the following statements will not result in the flow of funds from cash surplus companies to companies that require cash?

In a bill acceptance facility:

Yebuzz Ltd has just raised $100 million by an issue of 10 million converting preference shares.Each CPS converts into five ordinary shares.If the ordinary share price immediately prior to conversion is $2 per share,calculate the rate of the conversion discount.

A _____________ loan is where a number of banks join together to provide what is,in effect,a term loan,with each lender having identical rights.

Which type of debt takes the form of loans arranged privately between two parties where the lender is usually a bank or other financial institution?

Interest rates are normally higher on unsecured notes than on debentures because:

Introduction

Consumption, Investment and the Capital Market

The Time Value of Money: An Introduction to Financial Mathematics

Applying the Time Value of Money to Security Valuation

Project Evaluation: Principles and Methods

The Application of Project Evaluation Methods

Risk and Return

The Capital Market

Sources of Finance: Equity

Payout Policy

Principles of Capital Structure

Capital Structure Decisions

The Cost of Capital and Taxation Issues in Project Evaluation

Leasing and Other Equipment Finance

Capital Market Efficiency

Futures Contracts

Options and Contingent Claims

Analysis of Takeovers

International Financial Management

Management of Short-Term Assets: Inventory

Management of Short-Term Assets: Liquid Assets and Accounts Receivable

Filters