Question 1

When a bank needs funds for day-to-day operational liquidity requirements it may issue:

Accepted Answer

A)  bank bills. 
B)  CDs. 
C)  CP. 
D)  P-notes. 
A)  bank bills. 
B)  CDs. 
C)  CP. 
D)  P-notes.

Question 2

Which financial security is known as one-name paper?

Accepted Answer

A)  Bank bills 
B)  CDs 
C)  Promissory notes 
D)  Unsecured notes 
A)  Bank bills 
B)  CDs 
C)  Promissory notes 
D)  Unsecured notes

Question 3

Discuss what factors influence the yield at which a commercial bill will be discounted

Accepted Answer

The yield will be affected by factors th

Question 4

A company wants to invest some surplus short-term funds and plans to buy a 180-day bank bill with a face value of $100 000.What is the yield on the bill if its price is currently $94 234?

Accepted Answer

A)  11.69% 
B)  12.41% 
C)  13.23% 
D)  13.32% 
A)  11.69% 
B)  12.41% 
C)  13.23% 
D)  13.32%

Question 5

When a finance company provides a loan to a business against the security of the business's accounts receivable this is called:

Accepted Answer

A)  factoring. 
B)  floor plan finance. 
C)  trade credit. 
D)  accounts receivable financing. 
A)  factoring. 
B)  floor plan finance. 
C)  trade credit. 
D)  accounts receivable financing.

Question 6

What are some of the advantages of bill financing for a company over other forms of short-term debt?

Accepted Answer

First,a major advantage is usually it is

Question 7

Which of the following statements about the issuing of a commercial bill is incorrect?

Accepted Answer

A)  Commercial bills are sold at discount to face value. 
B)  A bank may accept a commercial bill. 
C)  The drawer is the party that issues the commercial bill. 
D)  The discounter is the party that borrows the funds. 
A)  Commercial bills are sold at discount to face value. 
B)  A bank may accept a commercial bill. 
C)  The drawer is the party that issues the commercial bill. 
D)  The discounter is the party that borrows the funds.

Question 8

Which of the following statements is correct?

Accepted Answer

A)  A bank bill is a negotiable instrument. 
B)  A bank-accepted bill is regarded by market participants as equivalent to a bank-endorsed bill. 
C)  The issuer of the bank-accepted bill will repay the holder of the bill directly at maturity. 
D)  The issuer of a bank-endorsed bill has to pay regular interest payments to the holder, unlike with a bank-accepted bill. 
A)  A bank bill is a negotiable instrument. 
B)  A bank-accepted bill is regarded by market participants as equivalent to a bank-endorsed bill. 
C)  The issuer of the bank-accepted bill will repay the holder of the bill directly at maturity. 
D)  The issuer of a bank-endorsed bill has to pay regular interest payments to the holder, unlike with a bank-accepted bill.

Question 9

What are some advantages of promissory notes financing for a large company?

Accepted Answer

For a large company it can mean a lower

Question 10

The interest rate charged on an unsecured short-term P-note to a company is generally ________ the interest rate on a secured loan.

Accepted Answer

A)  lower than 
B)  the same as 
C)  higher than 
D)  unrelated to 
A)  lower than 
B)  the same as 
C)  higher than 
D)  unrelated to

Question 11

As part of their liability management,banks sell which financial instrument?

Accepted Answer

A)  Bank bill 
B)  Commercial paper 
C)  Certificate of deposit 
D)  Promissory note 
A)  Bank bill 
B)  Commercial paper 
C)  Certificate of deposit 
D)  Promissory note

Question 12

Which of the following statements about an overdraft facility is NOT correct?

Accepted Answer

A)  Banks require an overdraft facility to be operated on a fully fluctuating basis. 
B)  Generally, the agreed interest rate on an overdraft is calculated by the bank on the balance at the end of the month. 
C)  The bank lender will charge an establishment fee to cover the establishment costs of an overdraft. 
D)  There is an unused limit fee that is much less than the actual overdraft interest rate. 
A)  Banks require an overdraft facility to be operated on a fully fluctuating basis. 
B)  Generally, the agreed interest rate on an overdraft is calculated by the bank on the balance at the end of the month. 
C)  The bank lender will charge an establishment fee to cover the establishment costs of an overdraft. 
D)  There is an unused limit fee that is much less than the actual overdraft interest rate.

Question 13

A company has decided to issue a 120-day bank-accepted bill to raise additional funding of $250 000 to buy equipment.If the bank has agreed to discount the bill at a yield of 7.65% per annum,what will be the face value of the bill?

Accepted Answer

A)  $230 875 
B)  $250 000 
C)  $256 287.67 
D)  $312 876.71 
A)  $230 875 
B)  $250 000 
C)  $256 287.67 
D)  $312 876.71

Question 14

A source of short-term funds available to smaller firms (for example,finance provided to a car dealership for car funding)is:

Accepted Answer

A)  floor plan finance. 
B)  factoring. 
C)  with-recourse factoring. 
D)  accounts receivable financing. 
A)  floor plan finance. 
B)  factoring. 
C)  with-recourse factoring. 
D)  accounts receivable financing.

Question 15

Which of the following statements about bank bills is incorrect?

Accepted Answer

A)  The drawer is the party that issues the bill. 
B)  The acceptor is the party that has primary liability to repay the face value of the bill. 
C)  The payee is the party that receives the borrowed funds when the bill is initially issued. 
D)  The discounter is the party that repays the acceptor at maturity. 
A)  The drawer is the party that issues the bill. 
B)  The acceptor is the party that has primary liability to repay the face value of the bill. 
C)  The payee is the party that receives the borrowed funds when the bill is initially issued. 
D)  The discounter is the party that repays the acceptor at maturity.

Question 16

A holder of a 180-day bill with 60 days left to maturity and a face value of $100 000 chooses to sell it into the market.If 60-day bills are currently yielding 6.8% per annum,what price will be obtained?

Accepted Answer

A)  $81 728.61 
B)  $89 945.79 
C)  $97 813.27 
D)  $98 894.55 
A)  $81 728.61 
B)  $89 945.79 
C)  $97 813.27 
D)  $98 894.55

Question 17

As an alternative to issuing a commercial bill for short-term financing,corporations with an excellent credit standing may:

Accepted Answer

A)  buy commercial paper. 
B)  issue commercial paper. 
C)  issue preference shares. 
D)  issue convertible notes. 
A)  buy commercial paper. 
B)  issue commercial paper. 
C)  issue preference shares. 
D)  issue convertible notes.

Question 18

Which one of the following statements is true?

Accepted Answer

A)  Promissory notes are sold with contingent liability in the secondary market. 
B)  Both commercial bills and promissory notes are sold with contingent liability in the secondary market. 
C)  Commercial bills are sold with contingent liability in the secondary market, whereas promissory notes are sold without contingent liability. 
D)  Promissory notes and commercial bills are both sold without contingent liability in the secondary market. 
A)  Promissory notes are sold with contingent liability in the secondary market. 
B)  Both commercial bills and promissory notes are sold with contingent liability in the secondary market. 
C)  Commercial bills are sold with contingent liability in the secondary market, whereas promissory notes are sold without contingent liability. 
D)  Promissory notes and commercial bills are both sold without contingent liability in the secondary market.

Question 19

Negotiable certificates of deposit:

Accepted Answer

A)  pay interest, as they are interest-bearing accounts at a bank. 
B)  are short-term securities, issued by banks for financing purposes. 
C)  have a longer maturity date than promissory notes. 
D)  have little liquidity in the secondary market. 
A)  pay interest, as they are interest-bearing accounts at a bank. 
B)  are short-term securities, issued by banks for financing purposes. 
C)  have a longer maturity date than promissory notes. 
D)  have little liquidity in the secondary market.

Question 20

When compared with bank bills,commercial paper has the advantage:

Accepted Answer

A)  that no interest is paid until maturity, unlike for a bank bill. 
B)  that a holder of commercial paper has no contingent liability when selling in the money markets. 
C)  that an issue of commercial paper often has a rollover facility attached, unlike for bank bills. 
D)  of greater liquidity in the secondary market. 
A)  that no interest is paid until maturity, unlike for a bank bill. 
B)  that a holder of commercial paper has no contingent liability when selling in the money markets. 
C)  that an issue of commercial paper often has a rollover facility attached, unlike for bank bills. 
D)  of greater liquidity in the secondary market.

Exam 9: Short-Term Debt

When a bank needs funds for day-to-day operational liquidity requirements it may issue:

Which financial security is known as one-name paper?

Discuss what factors influence the yield at which a commercial bill will be discounted

A company wants to invest some surplus short-term funds and plans to buy a 180-day bank bill with a face value of $100 000.What is the yield on the bill if its price is currently $94 234?

When a finance company provides a loan to a business against the security of the business's accounts receivable this is called:

What are some of the advantages of bill financing for a company over other forms of short-term debt?

Which of the following statements about the issuing of a commercial bill is incorrect?

Which of the following statements is correct?

What are some advantages of promissory notes financing for a large company?

The interest rate charged on an unsecured short-term P-note to a company is generally ________ the interest rate on a secured loan.

As part of their liability management,banks sell which financial instrument?

Which of the following statements about an overdraft facility is NOT correct?

A company has decided to issue a 120-day bank-accepted bill to raise additional funding of $250 000 to buy equipment.If the bank has agreed to discount the bill at a yield of 7.65% per annum,what will be the face value of the bill?

A source of short-term funds available to smaller firms (for example,finance provided to a car dealership for car funding)is:

Which of the following statements about bank bills is incorrect?

A holder of a 180-day bill with 60 days left to maturity and a face value of $100 000 chooses to sell it into the market.If 60-day bills are currently yielding 6.8% per annum,what price will be obtained?

As an alternative to issuing a commercial bill for short-term financing,corporations with an excellent credit standing may:

Which one of the following statements is true?

Negotiable certificates of deposit:

When compared with bank bills,commercial paper has the advantage:

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

Medium-To-Long-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

Filters