Question 1

Which of the following permits a company to run its current account into deficit up to an agreed date?

Accepted Answer

A) Direct loan. 
B) Overdraft. 
C) Secured loan. 
D) Short-term loan. 
A) Direct loan. 
B) Overdraft. 
C) Secured loan. 
D) Short-term loan.

Question 2

To invest funds,available only in the short term,a company can:

Accepted Answer

A) buy out a company. 
B) issue a commercial bill. 
C) issue a promissory note. 
D) buy a promissory note. 
A) buy out a company. 
B) issue a commercial bill. 
C) issue a promissory note. 
D) buy a promissory note.

Question 3

Chameleon Ltd has a fixed interest rate borrowing of $1 million at 10% p.a.for five years and wishes to swap to a floating rate loan.In the swap,Chameleon pays the fixed interest payment of $100 000 on the loan and the final balloon payment.It agrees to pay a financial intermediary a variable amount at the bank-accepted bill interest rate on the $1 million and the financial intermediary pays Chameleon a fixed rate of 10% p.a.What is the result of this swap by Chameleon?

Accepted Answer

A) Chameleon has effectively borrowed $1 million at the bank-accepted bill rate. 
B) Chameleon has effectively borrowed $1 million at the fixed interest rate. 
C) Chameleon has effectively borrowed $100 000 at the bank-accepted bill rate. 
D) Chameleon has effectively borrowed $100 000 at the fixed interest rate. 
A) Chameleon has effectively borrowed $1 million at the bank-accepted bill rate. 
B) Chameleon has effectively borrowed $1 million at the fixed interest rate. 
C) Chameleon has effectively borrowed $100 000 at the bank-accepted bill rate. 
D) Chameleon has effectively borrowed $100 000 at the fixed interest rate.

Question 4

A convertible note:

Accepted Answer

A) can be issued by a rights issue to existing shareholders or by a placement to institutions,which is restricted by the '10 per cent rule' under ASX listing rule 7.1. 
B) is attractive to issuers requiring long-term,fixed-rate debt finance. 
C) offers a higher interest rate than a straight unsecured note. 
D) all of the given options. 
A) can be issued by a rights issue to existing shareholders or by a placement to institutions,which is restricted by the '10 per cent rule' under ASX listing rule 7.1. 
B) is attractive to issuers requiring long-term,fixed-rate debt finance. 
C) offers a higher interest rate than a straight unsecured note. 
D) all of the given options.

Question 5

A fully drawn bill facility:

Accepted Answer

A) provides a company with an unspecified amount for a specified period. 
B) provides a company with a specified amount for a specified period. 
C) provides a company with an unspecified amount for an unspecified period. 
D) provides a company with a specified amount for an unspecified period. 
A) provides a company with an unspecified amount for a specified period. 
B) provides a company with a specified amount for a specified period. 
C) provides a company with an unspecified amount for an unspecified period. 
D) provides a company with a specified amount for an unspecified period.

Question 6

In order to discount a commercial bill:

Accepted Answer

A) a buyer must be found. 
B) a seller must be found. 
C) the Reserve Bank must be willing to lend. 
D) the borrower must pay back the loan within a specified time. 
A) a buyer must be found. 
B) a seller must be found. 
C) the Reserve Bank must be willing to lend. 
D) the borrower must pay back the loan within a specified time.

Question 7

A debtor finance agreement under which the discounter is not reimbursed by the selling company if the debtor defaults is known as:

Accepted Answer

A) debtor finance without recourse. 
B) debtor finance with recourse. 
C) confidential discounting. 
D) cooperation discounting. 
A) debtor finance without recourse. 
B) debtor finance with recourse. 
C) confidential discounting. 
D) cooperation discounting.

Question 8

Nosam Ltd has just raised $100 million by an issue of 5 million converting preference shares.If each CPS converts into 20 ordinary shares on conversion,calculate the value of the ordinary shares received in exchange for each converting preference share.Assume the conversion discount is 5 per cent.

Accepted Answer

A) $20.00 
B) $21.05 
C) $105.20 
D) $101.00 
A) $20.00 
B) $21.05 
C) $105.20 
D) $101.00

Question 9

Bonds issued outside the borrower's country and denominated in the currency of the country in which it is issued are known as:

Accepted Answer

A) foreign bonds. 
B) domestic bonds. 
C) eurobonds. 
D) Australian bonds. 
A) foreign bonds. 
B) domestic bonds. 
C) eurobonds. 
D) Australian bonds.

Question 10

The interbank overnight rate is:

Accepted Answer

A) well below the indicator rate for business lending;otherwise,a company could draw on its overdraft to borrow profitably in the cash market. 
B) well above the indicator rate for business lending;otherwise,a company could draw on its overdraft to borrow profitably in the cash market. 
C) well below the indicator rate for business lending;otherwise,a company could draw on its overdraft to lend profitably in the cash market. 
D) well above the indicator rate for business lending;otherwise,a company could draw on its overdraft to lend profitably in the cash market. 
A) well below the indicator rate for business lending;otherwise,a company could draw on its overdraft to borrow profitably in the cash market. 
B) well above the indicator rate for business lending;otherwise,a company could draw on its overdraft to borrow profitably in the cash market. 
C) well below the indicator rate for business lending;otherwise,a company could draw on its overdraft to lend profitably in the cash market. 
D) well above the indicator rate for business lending;otherwise,a company could draw on its overdraft to lend profitably in the cash market.

Question 11

Which statement best describes accounts receivable?

Accepted Answer

A) An arrangement in which a seller allows the purchaser a period of time before requiring payment. 
B) The equivalent to a short-term loan made by the seller to a purchaser of an amount equal to the purchase price. 
C) A sum of money owed to the seller as a result of having sold goods on credit. 
D) An arrangement in which the purchasing company delays paying until after the due date. 
A) An arrangement in which a seller allows the purchaser a period of time before requiring payment. 
B) The equivalent to a short-term loan made by the seller to a purchaser of an amount equal to the purchase price. 
C) A sum of money owed to the seller as a result of having sold goods on credit. 
D) An arrangement in which the purchasing company delays paying until after the due date.

Question 12

Most marketable long-term debt securities have a fixed interest rate known as the:

Accepted Answer

A) risk-free rate. 
B) coupon rate. 
C) yield to maturity. 
D) default rate. 
A) risk-free rate. 
B) coupon rate. 
C) yield to maturity. 
D) default rate.

Question 13

An advantage of promissory notes over some other forms of finance is that:

Accepted Answer

A) entities selling a promissory note incur a contingent liability and are marketable. 
B) they are marketable. 
C) entities selling a promissory note incur a contingent liability. 
D) they can be long-term as well as short-term. 
A) entities selling a promissory note incur a contingent liability and are marketable. 
B) they are marketable. 
C) entities selling a promissory note incur a contingent liability. 
D) they can be long-term as well as short-term.

Question 14

The features of convertible notes include:

Accepted Answer

A) being treated as equity for tax purposes,but as debt for the purpose of calculating balance sheet ratios used in loan agreements. 
B) undated notes which can be converted to ordinary shares at any time. 
C) being issued on international markets. 
D) all of the given options. 
A) being treated as equity for tax purposes,but as debt for the purpose of calculating balance sheet ratios used in loan agreements. 
B) undated notes which can be converted to ordinary shares at any time. 
C) being issued on international markets. 
D) all of the given options.

Question 15

Co-op Ltd issues converting preference shares with a face value of $15,which convert to ordinary shares on 30 June.The conversion ratio is determined by dividing the face value of the preference share by an amount equal to the price of Co-op ordinary shares on 30 June,less 10 per cent.If the market value of ordinary shares on the conversion is $5.35,at what value will each preference share convert into ordinary shares?

Accepted Answer

A) $15.00 
B) $16.67 
C) $5.35 
D) $13.50 
A) $15.00 
B) $16.67 
C) $5.35 
D) $13.50

Question 16

An interest rate swap involves an exchange of principles and interest payments.

Accepted Answer

A) True 
 B)False

Question 17

The interest rate on overnight loans between a bank and other banks is:

Accepted Answer

A) the cash rate. 
B) the LIBOR. 
C) the interbank cash rate. 
D) the interbank cash rate or simply the cash rate. 
A) the cash rate. 
B) the LIBOR. 
C) the interbank cash rate. 
D) the interbank cash rate or simply the cash rate.

Question 18

In a fixed-for-floating interest rate swap:

Accepted Answer

A) Counter-party A pays Counter-party B an amount calculated according to a floating interest rate in return for an amount calculated on the basis of a fixed interest rate. 
B) The amounts payable depend on the notional principal. 
C) Only interest flows are involved until maturity,when the principal is exchanged based on the difference in the amounts calculated according to a floating interest rate and a fixed interest rate. 
D) Counter-party A pays Counter-party B an amount calculated according to a floating interest rate in return for an amount calculated on the basis of a fixed interest rate and the amounts payable depend on the notional principal. 
A) Counter-party A pays Counter-party B an amount calculated according to a floating interest rate in return for an amount calculated on the basis of a fixed interest rate. 
B) The amounts payable depend on the notional principal. 
C) Only interest flows are involved until maturity,when the principal is exchanged based on the difference in the amounts calculated according to a floating interest rate and a fixed interest rate. 
D) Counter-party A pays Counter-party B an amount calculated according to a floating interest rate in return for an amount calculated on the basis of a fixed interest rate and the amounts payable depend on the notional principal.

Question 19

The interest rate charged on the overdraft is normally on the basis of a margin above:

Accepted Answer

A) the call rate. 
B) the LIBOR. 
C) an indicator rate. 
D) the cash rate. 
A) the call rate. 
B) the LIBOR. 
C) an indicator rate. 
D) the cash rate.

Question 20

Accounts receivable is an asset that arises when a company:

Accepted Answer

A) purchases goods or services on credit. 
B) sells goods or services on credit. 
C) purchases goods or services for cash. 
D) sells goods or services for cash. 
A) purchases goods or services on credit. 
B) sells goods or services on credit. 
C) purchases goods or services for cash. 
D) sells goods or services for cash.

Which of the following permits a company to run its current account into deficit up to an agreed date?

To invest funds,available only in the short term,a company can:

A convertible note:

A fully drawn bill facility:

In order to discount a commercial bill:

A debtor finance agreement under which the discounter is not reimbursed by the selling company if the debtor defaults is known as:

Nosam Ltd has just raised $100 million by an issue of 5 million converting preference shares.If each CPS converts into 20 ordinary shares on conversion,calculate the value of the ordinary shares received in exchange for each converting preference share.Assume the conversion discount is 5 per cent.

Bonds issued outside the borrower's country and denominated in the currency of the country in which it is issued are known as:

The interbank overnight rate is:

Which statement best describes accounts receivable?

Most marketable long-term debt securities have a fixed interest rate known as the:

An advantage of promissory notes over some other forms of finance is that:

The features of convertible notes include:

An interest rate swap involves an exchange of principles and interest payments.

The interest rate on overnight loans between a bank and other banks is:

In a fixed-for-floating interest rate swap:

The interest rate charged on the overdraft is normally on the basis of a margin above:

Accounts receivable is an asset that arises when a company:

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

Which of the following permits a company to run its current account into deficit up to an agreed date?

To invest funds,available only in the short term,a company can:

A convertible note:

A fully drawn bill facility:

In order to discount a commercial bill:

A debtor finance agreement under which the discounter is not reimbursed by the selling company if the debtor defaults is known as:

Nosam Ltd has just raised $100 million by an issue of 5 million converting preference shares.If each CPS converts into 20 ordinary shares on conversion,calculate the value of the ordinary shares received in exchange for each converting preference share.Assume the conversion discount is 5 per cent.

Bonds issued outside the borrower's country and denominated in the currency of the country in which it is issued are known as:

The interbank overnight rate is:

Which statement best describes accounts receivable?

Most marketable long-term debt securities have a fixed interest rate known as the:

An advantage of promissory notes over some other forms of finance is that:

The features of convertible notes include:

An interest rate swap involves an exchange of principles and interest payments.

The interest rate on overnight loans between a bank and other banks is:

In a fixed-for-floating interest rate swap:

The interest rate charged on the overdraft is normally on the basis of a margin above:

Accounts receivable is an asset that arises when a company:

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