Question 1

What happens to the coupon rate of a $100 face value bond that pays $7 coupon annually,if market interest rates change from 8 to 9%? The coupon rate:

Accepted Answer

A)  increases to 8%. 
B)  increases to 9%. 
C)  remains at 7%. 
D)  increases to nearly 9%. 
A)  increases to 8%. 
B)  increases to 9%. 
C)  remains at 7%. 
D)  increases to nearly 9%.

Question 2

In the event of failure for a company that has issued a bond,the highest claims on the company's assets generally comes from:

Accepted Answer

A)  floating-charge debenture holders. 
B)  fixed-charge debenture holders. 
C)  unsecured note holders. 
D)  the shareholders. 
A)  floating-charge debenture holders. 
B)  fixed-charge debenture holders. 
C)  unsecured note holders. 
D)  the shareholders.

Question 3

The purpose of debt covenants that ban borrowers from entering into certain types of leases is to:

Accepted Answer

A)  limit the amount of fixed-interest payments. 
B)  prevent the firm from supplying too many cars to employees. 
C)  protect the lender in their claim over pledged assets in the event of failure. 
D)  protect the shareholders' claims over assets. 
A)  limit the amount of fixed-interest payments. 
B)  prevent the firm from supplying too many cars to employees. 
C)  protect the lender in their claim over pledged assets in the event of failure. 
D)  protect the shareholders' claims over assets.

Question 4

Compared with an amortised loan,a deferred repayment loan involves:

Accepted Answer

A)  periodic interest and principal repayments. 
B)  periodic interest and principal repayments when positive cash flows begin. 
C)  periodic interest payments and principal repaid at maturity. 
D)  periodic principal payments and interest repaid at maturity. 
A)  periodic interest and principal repayments. 
B)  periodic interest and principal repayments when positive cash flows begin. 
C)  periodic interest payments and principal repaid at maturity. 
D)  periodic principal payments and interest repaid at maturity.

Question 5

Which one of the following statements about bonds is correct?

Accepted Answer

A)  Most bonds pay interest annually. 
B)  The yield on a bond for a bond investor is generally a fixed rate. 
C)  Bond prices vary inversely with interest rates. 
D)  Bond coupon rates vary with interest rates. 
A)  Most bonds pay interest annually. 
B)  The yield on a bond for a bond investor is generally a fixed rate. 
C)  Bond prices vary inversely with interest rates. 
D)  Bond coupon rates vary with interest rates.

Question 6

All of the following financial institutions arrange mortgage finance for companies except:

Accepted Answer

A)  commercial banks. 
B)  insurance companies. 
C)  building societies. 
D)  investment banks. 
A)  commercial banks. 
B)  insurance companies. 
C)  building societies. 
D)  investment banks.

Question 7

A $1000 face value bond,with a 7.5% coupon rate paid semi-annually and maturing in five years,is currently yielding 6.4% in the market.What is the current price of the bond?

Accepted Answer

A)  $1000 
B)  $1045.84 
C)  $1046.44 
D)  $1079.45 
A)  $1000 
B)  $1045.84 
C)  $1046.44 
D)  $1079.45

Question 8

A term loan is:

Accepted Answer

A)  a bill issued to finance a specific trade transaction. 
B)  a bill issued to raise funds for general purposes. 
C)  a flexible funding arrangement for companies. 
D)  when funds are borrowed for a set period. 
A)  a bill issued to finance a specific trade transaction. 
B)  a bill issued to raise funds for general purposes. 
C)  a flexible funding arrangement for companies. 
D)  when funds are borrowed for a set period.

Question 9

Discuss the features of mortgage agreements for commercial loans.

Accepted Answer

Companies may obtain debt finance by pro

Question 10

Discuss major features of a term loan.

Accepted Answer

A term loan is the main type of intermed

Question 11

Which of the following is a positive loan covenant?

Accepted Answer

A)  A minimum working capital ratio 
B)  A maximum gearing ratio 
C)  A maximum level of unsecured debt 
D)  All of the given answers 
A)  A minimum working capital ratio 
B)  A maximum gearing ratio 
C)  A maximum level of unsecured debt 
D)  All of the given answers

Question 12

When illiquid assets are transformed into new asset-backed securities,the process is called:

Accepted Answer

A)  conversion. 
B)  liquidisation. 
C)  securitisation. 
D)  transformation. 
A)  conversion. 
B)  liquidisation. 
C)  securitisation. 
D)  transformation.

Question 13

An unsecured note differs from a debenture in that it has:

Accepted Answer

A)  as security only unpledged assets. 
B)  as security a floating charge over assets. 
C)  as security a fixed charge over assets. 
D)  no supporting security. 
A)  as security only unpledged assets. 
B)  as security a floating charge over assets. 
C)  as security a fixed charge over assets. 
D)  no supporting security.

Question 14

A term loan with interest and principal repayments that are amortised over the term are sometimes called credit foncier loans.

Accepted Answer

A) True 
 B)False

Question 15

The purpose of debt covenants that require the firm to rank any subsequent borrowing below the original loan is to:

Accepted Answer

A)  limit the amount of fixed-interest payments. 
B)  make sure that any cash restraints do not affect current obligations. 
C)  protect the lender in their claim over pledged assets in the event of failure. 
D)  protect the shareholders' claims over assets. 
A)  limit the amount of fixed-interest payments. 
B)  make sure that any cash restraints do not affect current obligations. 
C)  protect the lender in their claim over pledged assets in the event of failure. 
D)  protect the shareholders' claims over assets.

Question 16

Under mortgage financing,the mortgagor is the lender of the mortgage funds.

Accepted Answer

A) True 
 B)False

Question 17

The borrower who issues a mortgage with real property as collateral to the bank is the:

Accepted Answer

A)  mortgagor. 
B)  mortgagee. 
C)  mortgager. 
D)  mortgage. 
A)  mortgagor. 
B)  mortgagee. 
C)  mortgager. 
D)  mortgage.

Question 18

Apart from an interest charge on funds advanced to a borrower,a bank will charge a service fee for considering the loan application and loan preparation.

Accepted Answer

A) True 
 B)False

Question 19

A $1000 face value bond,with coupon rate of 8% paid annually,has five years to maturity.If bonds of similar risk are currently earning 6%,what is the current price of the bond?

Accepted Answer

A)  $920.15 
B)  $1000 
C)  $1084.25 
D)  None of the given answers 
A)  $920.15 
B)  $1000 
C)  $1084.25 
D)  None of the given answers

Question 20

Which of the following statements is correct?

Accepted Answer

A)  Short-term debt instruments are more volatile in price than long-term instruments. 
B)  Coupon rates are generally fixed when the bond is issued. 
C)  Bond prices and market interest rates move together. 
D)  The higher the coupon of a bond, the lower its price. 
A)  Short-term debt instruments are more volatile in price than long-term instruments. 
B)  Coupon rates are generally fixed when the bond is issued. 
C)  Bond prices and market interest rates move together. 
D)  The higher the coupon of a bond, the lower its price.

Exam 10: Medium-To-Long-Term Debt

What happens to the coupon rate of a $100 face value bond that pays $7 coupon annually,if market interest rates change from 8 to 9%? The coupon rate:

In the event of failure for a company that has issued a bond,the highest claims on the company's assets generally comes from:

The purpose of debt covenants that ban borrowers from entering into certain types of leases is to:

Compared with an amortised loan,a deferred repayment loan involves:

Which one of the following statements about bonds is correct?

All of the following financial institutions arrange mortgage finance for companies except:

A $1000 face value bond,with a 7.5% coupon rate paid semi-annually and maturing in five years,is currently yielding 6.4% in the market.What is the current price of the bond?

A term loan is:

Discuss the features of mortgage agreements for commercial loans.

Discuss major features of a term loan.

Which of the following is a positive loan covenant?

When illiquid assets are transformed into new asset-backed securities,the process is called:

An unsecured note differs from a debenture in that it has:

A term loan with interest and principal repayments that are amortised over the term are sometimes called credit foncier loans.

The purpose of debt covenants that require the firm to rank any subsequent borrowing below the original loan is to:

Under mortgage financing,the mortgagor is the lender of the mortgage funds.

The borrower who issues a mortgage with real property as collateral to the bank is the:

Apart from an interest charge on funds advanced to a borrower,a bank will charge a service fee for considering the loan application and loan preparation.

A $1000 face value bond,with coupon rate of 8% paid annually,has five years to maturity.If bonds of similar risk are currently earning 6%,what is the current price of the bond?

Which of the following statements is correct?

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

Short-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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