Question 1

All of the following affect interest rates charged on term loans except:

Accepted Answer

A)  default risk. 
B)  the maturity. 
C)  the repayment schedule. 
D)  refinancing risk. 
A)  default risk. 
B)  the maturity. 
C)  the repayment schedule. 
D)  refinancing risk.

Question 2

Which of the following is NOT an advantage of leasing from the lessee's viewpoint?

Accepted Answer

A)  100% financing 
B)  The company's capital is not involved 
C)  Flexible repayment scheduling 
D)  With a net lease, costs of ownership remain with the lessee 
A)  100% financing 
B)  The company's capital is not involved 
C)  Flexible repayment scheduling 
D)  With a net lease, costs of ownership remain with the lessee

Question 3

The main longer-term finance provided by financial intermediaries is/are:

Accepted Answer

A)  certificates of deposit. 
B)  commercial paper. 
C)  corporate bonds. 
D)  term loans. 
A)  certificates of deposit. 
B)  commercial paper. 
C)  corporate bonds. 
D)  term loans.

Question 4

A company has two outstanding bonds with the same features,apart from the maturity date.Bond A matures in five years,while bond B matures in 10 years.If the market interest rate changes by 5%:

Accepted Answer

A)  bond A will have the greater change in price. 
B)  bond B will have the greater change in price. 
C)  the price of the bonds will not alter. 
D)  the price of the bonds will change by the same amount. 
A)  bond A will have the greater change in price. 
B)  bond B will have the greater change in price. 
C)  the price of the bonds will not alter. 
D)  the price of the bonds will change by the same amount.

Question 5

The type of loan where a company pays periodic interest payments over its term and the principal at maturity to a lender is called:

Accepted Answer

A)  amortised. 
B)  a debit foncier. 
C)  deferred payment. 
D)  interest-only. 
A)  amortised. 
B)  a debit foncier. 
C)  deferred payment. 
D)  interest-only.

Question 6

Compared with missing an interest payment on debt,the penalties for missing a financial lease payment are:

Accepted Answer

A)  less severe. 
B)  the same. 
C)  more severe. 
D)  not related. 
A)  less severe. 
B)  the same. 
C)  more severe. 
D)  not related.

Question 7

A holder of ________ has generally no charge over the issuing company's unpledged assets.

Accepted Answer

A)  a debenture 
B)  a subordinated debenture 
C)  a floating charge debenture 
D)  an unsecured note 
A)  a debenture 
B)  a subordinated debenture 
C)  a floating charge debenture 
D)  an unsecured note

Question 8

A company borrows $125 000 from a bank at 7.2% per annum to be amortised over six years.The monthly instalment is:

Accepted Answer

A)  $1861.11 
B)  $2143.15 
C)  $7274.21 
D)  $26 386.61 
A)  $1861.11 
B)  $2143.15 
C)  $7274.21 
D)  $26 386.61

Question 9

The market price of previously issued bonds is often different from face value because:

Accepted Answer

A)  the coupon rate has altered. 
B)  the maturity date has altered. 
C)  the market rate of interest has altered. 
D)  previously issued bonds sell at a discount to new bonds. 
A)  the coupon rate has altered. 
B)  the maturity date has altered. 
C)  the market rate of interest has altered. 
D)  previously issued bonds sell at a discount to new bonds.

Question 10

Define and discuss a reference interest rate in relation to lending.

Accepted Answer

A loan agreement will generally specify

Question 11

A bank charge on any part of a loan that has not been fully drawn down by a company is called a/an:

Accepted Answer

A)  establishment fee. 
B)  commitment fee. 
C)  line fee. 
D)  service fee. 
A)  establishment fee. 
B)  commitment fee. 
C)  line fee. 
D)  service fee.

Question 12

When a company defaults on interest payments for a debenture,the floating charge is said to ______ a fixed charge.

Accepted Answer

A)  transform into 
B)  crystallise into 
C)  originate as 
D)  adjust to 
A)  transform into 
B)  crystallise into 
C)  originate as 
D)  adjust to

Question 13

A debt security supported or secured by mortgage assets held by a bank is a/an:

Accepted Answer

A)  debenture. 
B)  income bond. 
C)  mortgage bond. 
D)  fixed-charge debenture. 
A)  debenture. 
B)  income bond. 
C)  mortgage bond. 
D)  fixed-charge debenture.

Question 14

A $1000 face value bond,with coupon rate of 9% paid annually,has six years to maturity.If bonds of similar risk are currently earning 11%,what is the current price of the bond?

Accepted Answer

A)  $915.39 
B)  $1000 
C)  $1089.72 
D)  None of the given answers 
A)  $915.39 
B)  $1000 
C)  $1089.72 
D)  None of the given answers

Question 15

Which type of financial claim is not satisfied until those of the creditors holding certain senior debts have been fully satisfied?

Accepted Answer

A)  Mortgage bonds 
B)  Unsecured notes 
C)  Subordinated debentures 
D)  Deferred interest debentures 
A)  Mortgage bonds 
B)  Unsecured notes 
C)  Subordinated debentures 
D)  Deferred interest debentures

Question 16

The value of a bond is the present value of the:

Accepted Answer

A)  dividends and coupon payments. 
B)  dividends and maturity value. 
C)  maturity value. 
D)  coupon payments and maturity value. 
A)  dividends and coupon payments. 
B)  dividends and maturity value. 
C)  maturity value. 
D)  coupon payments and maturity value.

Question 17

If a bond's price is at a premium to face value,it has a:

Accepted Answer

A)  yield below its coupon rate of interest. 
B)  yield equal to its coupon rate of interest. 
C)  yield above its coupon rate. 
D)  decreased risk premium. 
A)  yield below its coupon rate of interest. 
B)  yield equal to its coupon rate of interest. 
C)  yield above its coupon rate. 
D)  decreased risk premium.

Question 18

What is the current price of a debenture with a $500 000 face value,a coupon rate of 9.5% paid semi-annually,six years remaining to maturity and market interest rates increased to 14%?

Accepted Answer

A)  $320 149.12 
B)  $401 613.48 
C)  $410 644.78 
D)  $688 638.80 
A)  $320 149.12 
B)  $401 613.48 
C)  $410 644.78 
D)  $688 638.80

Question 19

A company can borrow from a bank at a margin to the bank's base rate.According to the text,all of the following factors affect this margin except:

Accepted Answer

A)  the credit risk of the company. 
B)  the term of the loan. 
C)  the term structure of interest rates. 
D)  the loan repayment schedule. 
A)  the credit risk of the company. 
B)  the term of the loan. 
C)  the term structure of interest rates. 
D)  the loan repayment schedule.

Question 20

All of the following features of a bond are fixed except the:

Accepted Answer

A)  coupon rate. 
B)  face value. 
C)  price. 
D)  interest payments. 
A)  coupon rate. 
B)  face value. 
C)  price. 
D)  interest payments.

Exam 10: Medium-To-Long-Term Debt

All of the following affect interest rates charged on term loans except:

Which of the following is NOT an advantage of leasing from the lessee's viewpoint?

The main longer-term finance provided by financial intermediaries is/are:

A company has two outstanding bonds with the same features,apart from the maturity date.Bond A matures in five years,while bond B matures in 10 years.If the market interest rate changes by 5%:

The type of loan where a company pays periodic interest payments over its term and the principal at maturity to a lender is called:

Compared with missing an interest payment on debt,the penalties for missing a financial lease payment are:

A holder of ________ has generally no charge over the issuing company's unpledged assets.

A company borrows $125 000 from a bank at 7.2% per annum to be amortised over six years.The monthly instalment is:

The market price of previously issued bonds is often different from face value because:

Define and discuss a reference interest rate in relation to lending.

A bank charge on any part of a loan that has not been fully drawn down by a company is called a/an:

When a company defaults on interest payments for a debenture,the floating charge is said to ______ a fixed charge.

A debt security supported or secured by mortgage assets held by a bank is a/an:

A $1000 face value bond,with coupon rate of 9% paid annually,has six years to maturity.If bonds of similar risk are currently earning 11%,what is the current price of the bond?

Which type of financial claim is not satisfied until those of the creditors holding certain senior debts have been fully satisfied?

The value of a bond is the present value of the:

If a bond's price is at a premium to face value,it has a:

What is the current price of a debenture with a $500 000 face value,a coupon rate of 9.5% paid semi-annually,six years remaining to maturity and market interest rates increased to 14%?

A company can borrow from a bank at a margin to the bank's base rate.According to the text,all of the following factors affect this margin except:

All of the following features of a bond are fixed except the:

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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