2010 Sem1 QUIZ3

2010 Sem1 QUIZ3:
1) Calculate the effective annual interest rate if your bank quotes you 10% per annum, compounded quarterly.
A.
14.01%
B.
10.38% 100%
C.
10%
D.
2.50%
2) The present value of an ordinary annuity with equal monthly payments of $300 over the next four years, assuming
market interest rates are 12% per annum, is:
A.
$911.20
B.
$1170.59
C.
$11 392.19
100%
D.
$18 366.78
3) Calculate the effective annual interest rate if you are quoted 8% per annum, compounded half yearly.
A.
8.27%
B.
8.16% 100%
C.
8.0%
D.
4.0%
4) An $8000 bank deposit earning compound interest of 8.21% per annum grows to _______ in 5.25 years.
A.
$11 284.00
B.
$12 058.14
C.
$12 105.81
100%
D.
$16 019.15
5) If you receive $10 000 back as principal and interest at the end of two years for an initial investment of $9127 at
the start of the term, what is the yield on your investment?
A.
4.37% per annum
B.
4.78% per annum100%
C.
8.73% per annum
D.
9.57% per annum
6) A major advantage of a bill financing facility is that it:
A.
lowers the acceptor's fees for a bank bill
B.
lowers the drawer's cost in drawing up the bill
C.
allows businesses to access financing at a lower cost than overdrafts
D.
lowers the discounter's fee for taking on risks associated with the bill
100%
7) Most agreements involving factoring of accounts receivable are made on a _______ basis.
A.
non-recourse
B.
notification
100%
C.
recourse
D.
non-notification
8) Compared with bill financing, commercial paper financing offers a large company:
A.
higher costs because of the need for collateral
B.
higher costs owing to the acceptance fee involved
C.
lower costs owing to no contingent liability when sold on
100%
D.
lower costs owing to lower bank fees
2010 Sem1 Quiz3
9) The interest rate charged on an unsecured short-term loan to a company is generally ________ the interest rate on
a secured loan.
A.
lower than
B.
the same as
C.
higher than
100%
D.
unrelated to
10) A company is likely to issue a bank bill if it wants:
A.
long-term financing
B.
to spread its interest payments over the medium term
C.
short-term financing
D.
to invest medium-term funds
0%
11. When a lender includes conditions in a loan agreement to protect its loan, these are known as:
A.
loan agreements
B.
loan covenants 100%
C.
loan terms
D.
loan actions
12. A term loan is:
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 100%
13. The type of loan where a company pays periodic interest payments over its term and the principal at maturity is
called:
A.
amortised
B.
a debit foncier
C.
deferred payment
D.
interest-only
0%
14.
A.
B.
C.
D.
________ has generally no charge over the issuing company's unpledged assets.
A debenture
A subordinated debenture
A floating charge debenture
An unsecured note
100%
15.
A.
B.
C.
D.
Which of the following best describes a fully amortised term loan?

An interest-only loan with principal repayable at maturity
Periodic repayments, including interest and principal reduction
100%
Interest repayments on the loan are fixed for the period of the loan
A 'low-start' loan whose repayments are increased over the term
2010 Sem1 Quiz3
1. The present value of an annuity of $11 000, received at the end of every year for ten years, where the required rate
of return is 5.6% per annum, compounded annually, is:
A.
$6379.01
B.
$7051.28
C.
$8251.76
D.
$82 517.62
100%
2. What is the present value of $1 million payable in 90 days at 8.00% per annum simple interest?
A.
$835 240.27
B.
$974 372.66
C.
$980 655.56
100%
D.
$1 002 747.25
3. When a company discounts a commercial bill, this means the company:
A.
borrows funds 100%
B.
buys a commercial bill
C.
lends surplus funds
D.
invests in commercial bills
4. The main difference between an annuity and an annuity due lies in the:
A.
number of payments
B.
time of the first payment
100%
C.
interest rate
D.
frequency of payments
5. An investor plans to save $1000 per year for the next ten years as a retirement fund, and expects to earn 8.4% per
annum, compounded monthly over the period, on all invested funds. How much will the investor have at the end of ten
years?
A.
$187 085.48
100%
B.
$296 035.24
C.
$126 882.77
D.
$153 178.10
6. Which of the following statements about bank bills is INCORRECT?
A.
The interest rate on a bank bill is generally higher than on a bank overdraft.
B.
The interest rate on a bank bill is generally lower than the yield on a Treasury note. 100%
C.
The interest rate on a bank overdraft is generally higher than the yield on a Treasury note.
D.
The interest rate on a bank overdraft is generally higher than the yield on a Treasury bond.
7. Which one of the following statements is true?

A.
As a promissory note is a one-name paper, only the buyer is required to endorse it.
B.
If a bank agrees to accept it, a corporation can issue a promissory note.
C.
Usually, initial buyers of promissory notes hold them until maturity. 0%
D.
Typically, a promissory note will be issued for 90 days.
8. Upon maturity, the final holder of the bill approaches the _________ for payment.
A.
drawer
B.
acceptor
100%
C.
endorser
D.
discounter
2010 Sem1 Quiz3
9. Which of the following rates serves as a reference interest rate in the United Kingdom?
A.
BBSW
B.
LIBOR 100%
C.
USCP
D.
SIBOR
10. When compared with bank bills, commercial paper has the advantage:
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 0%
D.
of greater liquidity in the secondary market
11. Bonds are:

A.
a type of equity financing
B.
a short-term financial arrangement with periodic interest payments
C.
a debt instrument issued at discount with interest and principal repaid at maturity
D.
long-term debt instruments
100%
12. One of the advantages of a prime rate set by a financial institution is that it is less likely to be affected by:
A.
changes in the bank bill swap rate
B.
short-term market illiquidity
100%
C.
short-term credit fluctuations
D.
long-term credit fluctuations
13. When the coupon rate of a bond is equal to the current market interest rates, a bond will sell at:
A.
discount
B.
par
100%
C.
premium
D.
book value
14. Which of the following statements is correct?
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.
0%
15. Which of the following is NOT usually an example of restrictive debt covenants?
A.
Limitations on additional borrowing
B.
Constraints on disposal of non-current assets
C.
Minimum levels of cash flow
0%
D.
Supplying the creditors with annual, audited financial statements
2010 Sem1 Quiz3
1. An $8000 bank deposit earning compound interest of 8.21% per annum grows to _______ in 5.25 years.
A.
$11 284.00
B.
$12 058.14
C.
$12 105.81
100%
D.
$16 019.15
2. A 90-day promissory note with a face value of $500 000 is issued at a yield of 7.789% per annum. Calculate its price.
A.
$379 971.77
B.
$419 442.84
C.
$490 578.08
100%
D.
$490 711.67
3. When a company discounts a commercial bill, this means the company:
A.
borrows funds 100%
B.
C.
lends surplus funds
D.
4. If the effective annual interest rate is known to be 16.0% on a debt that has monthly payments, what is the annual
percentage rate?
A.
16.00%
B.
14.93%
C.
12.45%
D.
1.33% 0%
5. If you invest $13 500 for 18 months at 6.9% per annum simple interest, what is the value of your at the end of the
18 months?
A.
$14 431.50
B.
$14 897.25
100%
C.
$21 647.25
D.
$22 815.00
6. What is a bill of exchange either accepted or endorsed by a bank called?
A.
A commercial bill
B.
A bank bill
100%
C.
A trade bill
D.
A negotiable bill
7. A company is offered credit terms of 2/10 n/40, but decides to forgo the cash discount and pay on the 45th day.
What is the company's cost of forgoing the cash discount?
A.
18.6%
B.
21.28%
C.
24.83% 0%
D.
None of the given answers.
8. As an alternative to issuing a commercial bill for short-term financing, corporations with an excellent credit standing
may:
A.
buy commercial paper
B.
issue commercial paper 100%
C.
issue preference shares
D.
issue convertible notes
2010 Sem1 Quiz3

A.
B.
C.
Usually, initial buyers of promissory notes hold them until maturity.
D.
100%
10. Which of the following statements about bills is INCORRECT?
A.
There is an active secondary market in bank-accepted bills.
B.
Once a bill has been discounted into the marketplace, the cost of funds will vary for the issuer.
C.
The drawer has a liability with a bank-accepted bill to pay face value to the acceptor bank.
D.
At maturity for a bank-accepted bill, the acceptor will pay face value to the holder.
0%
11.The coupon interest of a bond is calculated based on its _______, and is paid periodically.
A.
market value
B.
book value
C.
face value
100%
D.
surrender value
12. If a company wished to structure its financing so it repaid funds borrowed only when a project had positive cash
flows, it would choose a/an:
A.
fully drawn advance
B.
term loan
C.
interest-only loan
D.
deferred payment loan 100%
13. Which of the following is NOT an advantage of leasing from the lessor's perspective (compared with offering a
straight loan)?
A.
Leasing has a relatively low default risk.
B.
Administration costs may be lower for a lease than for a straight loan.
C.
The return to the lessor may be higher than for a straight loan.
0%
D.
The lessor may use the funds for other investment opportunities.
14. 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.
$320 149.12
0%
B.
$401 613.48
C.
$410 644.78
D.
$688 638.80
15. The purpose of debt covenants that ban borrowers from entering into certain types of leases is to:
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 0%
D.
protect the shareholders' claims over assets
2010 Sem1 Quiz3
1. If you invest $1600 for a year at 6.8% per annum simple interest, how much interest will you earn?
A.
$10.80
B.
$108.00 100%
C.
$1088.00
D.
$1708.80
2. If you invest $12 000 for 4.75 years at 7.88% per annum, with interest compounded monthly, what will your total
investment be worth at the end of the period?
A.
$12 378.94
B.
$15 476.29
C.
$16 232.40
D.
$17 426.34
100%
3. If you invest $7500 for a year at 7.4% per annum simple interest, what is the value of your investment at the end of
the year?
A.
$555.00
B.
$5550.00
C.
$8055.00
100%
D.
$13 050.00
4. You are considering an investment that will pay a lump sum of $50 000 at the end of six years and you decide that
9% per annum compounded monthly is an appropriate discount factor. What is the value of the investment in today's
dollar terms?
A.
$31 508.48
B.
$32 496.57
0%
C.
$31 934.98
D.
$47 846.89
5. If the effective annual interest rate is known to be 19.4% on a debt that has quarterly payments, what is the annual
percentage rate?
A.
19.40%
B.
19.10%
C.
18.13% 100%
D.
18.00%
6. Where a company wants to guarantee all of its issue of commercial paper, it can arrange for it to be:
A.
sold by tender
B.
underwritten
100%
C.
sold by tap
D.
sold with a face value less than $10 000
7. A company is offered credit terms of 2/10 n/40, but decides to forgo the cash discount and pay on the 45th day.
What is the company's cost of forgoing the cash discount?
A.
18.6%
B.
21.28%
C.
24.83% 0%
D.
8. Which of the following is NOT an advantage of factoring?
A.
Known cash flows are generated.
B.
Accounts receivable is turned into cash without delay.
C.
The credit and collection department of a company may be eliminated.
D.
The cost of financing is relatively high.
100%
2010 Sem1 Quiz3

A.
B.
C.
D.
100%
10. The interest rate charged on an unsecured short-term loan to a company is generally ________ the interest rate
on a secured loan.
A.
lower than
B.
the same as
C.
higher than
100%
D.
unrelated to
11. The main longer-term finance provided by financial intermediaries is:
A.
certificates of deposit
B.
commercial paper
C.
corporate bonds 0%
D.
term loans
12. A key difference between a positive covenant and a negative covenant is, for a:
A.
positive covenant, a company must comply with restrictions on its financial structure
B.
negative covenant, a company must maintain a minimum level of working capital
C.
negative covenant, a company must provide annual audited financial statements
0%
D.
positive covenant, a company must maintain a minimum debt to gross cash flow ratio
13. When a lender includes conditions in a loan agreement to protect its loan, these are known as:
A.
loan agreements
B.
loan covenants 100%
C.
loan terms
D.
loan actions
14. When the coupon rate of a bond is below the current market interest rates, a bond will sell at:
A.
discount100%
B.
par
C.
premium
D.
face value
15. Which of the following is NOT usually an example of restrictive debt covenants?
A.
B.
C.
0%
D.
2010 Sem1 Quiz3
1. If you receive $100 000 back as principal and interest at the end of the year for an initial investment of $93 456 at
the start of the year, what interest has been earned on your investment?
A.
6.54%
B.
65.4%
C.
7.00% 100%
D.
70.00%
2. A property investor receives rental payments of $1900 at the start of each month for five years. If the required
rate of return is 7.2% per annum, compounded monthly, what is the value of the property investment today?
A.
$83 067.50
B.
$90 092.50
C.
$95 498.05
0%
D.
$96 071.04
3. What is the current price of an existing debenture with a face value of $1000 that pays a fixed coupon of 8.4% per
annum, compounded annually, and maturing in five years? Current yields in the market are 6.6% per annum.
A.
$941.65
B.
$999.96
C.
$1016.26
100%
D.
$1049.54
4. If you invest $13 500 for 18 months at 6.9% per annum simple interest, what is the value of your investment at the
end of the 18 months?
A.
$14 431.50
B.
$14 897.25
100%
C.
$21 647.25
D.
$22 815.00
5. If the interest rate is 7.4% per annum, compounding quarterly, what is the future value of a six-year ordinary
annuity with quarterly payments of $4000?
A.
$28 903.12
B.
$85 938.40
C.
$62 647.89
D.
$103 126.09
100%
6. Where a company wants to guarantee all of its issue of commercial paper, it can arrange for it to be:
A.
sold by tender
B.
underwritten
100%
C.
sold by tap
D.
7. The major banks lend unsecured short-term funds in the following three basic ways:
A.
overdraft, bill financing, commercial paper
B.
overdraft, bill financing, fully drawn advances
C.
overdraft, commercial paper, cash advances
D.
commercial paper, negotiable certificates of deposit, overdraft
0%
8. When a company has a deal with a bank lender that allows access to short-term funds, this is called:
A.
a debt facility
B.
a credit facility 100%
C.
a debt provision
D.
a liability provision
2010 Sem1 Quiz3
9. Most
A.
B.
C.
D.
agreements involving factoring of accounts receivable are made on a _______ basis.

non-recourse
notification
100%
recourse
non-notification
10. A company has directly placed an issue of commercial paper that has a maturity of 90 days, with a face value of
$100 000 yielding 8.25% per annum. What amount would the company raise on the issue?
A.
$83 096.19
B.
$91 750.00
C.
$97 965.75
D.
$98 006.31
100%
11. A company issues a long-term debt security with specified interest payments and fixed charges over unpledged
assets. What type of security has been issued?
A.
Subordinated debt
B.
Unsecured notes
C.
Commercial mortgage
D.
Debenture
100%
12. 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.
$320 149.12
B.
$401 613.48
C.
$410 644.78
100%
D.
$688 638.80
13. The market price of previously issued bonds is often different from face value because:
A.
the coupon rate has altered
B.
the maturity date has altered
C.
the market rate of interest has altered 100%
D.
previously issued bonds sell at a discount to new bonds
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?
A.
$915.39
B.
$1000
C.
$1089.72
D.
0%
15. A company can borrow from a bank at a margin to the bank's base rate. All of the following affect this margin
EXCEPT:
A.
the credit risk of the company
B.
the term of the loan
C.
the term structure of interest rates
100%
D.
the loan repayment schedule
2010 Sem1 Quiz3
10
1. A bank bill with a face value of $500 000 and 90 days to maturity is purchased with a yield to maturity of 6.92% per
annum. After the bill has been held for 28 days, it is sold at a yield of 6.78% per annum. What is the holding period
yield for the holder of the note?
Student Response
A.
3.23% per annum
B.
7.11% per annum
C.
7.15% per annum 100%
D.
Value
Correct Answer Feedback
7.51% per annum
Score: 1/1
2.
When a company discounts a commercial bill, this means the company:
Student Response
A.
borrows funds 100%
B.
C.
D.
Value

lends surplus funds
Score: 1/1
3.
A property investor receives rental payments of $1900 at the start of each month for five years. If the
required rate of return is 7.2% per annum, compounded monthly, what is the value of the property investment today?
Student Response
A.
$83 067.50
B.
$90 092.50
C.
$95 498.05
D.
$96 071.04
100%
Value
Score: 1/1
4.
What is the present value of $1 million payable in 90 days at 8.00% per annum simple interest?
Student Response
A.
$835 240.27
B.
$974 372.66
C.
$980 655.56
100%
D.
Value
$1 002 747.25
2010 Sem1 Quiz3
11
Score: 1/1
5.
What is the current price of an existing debenture with a face value of $1000 that pays a fixed coupon of
8.4% per annum, compounded annually, and maturing in five years? Current yields in the market are 6.6% per annum.
Student Response
$941.65
$999.96
A.
B.
C.
$1016.26
D.
Value
100%
$1049.54
Score: 1/1
6.
A company is offered credit terms of 2/10 n/40, but decides to forgo the cash discount and pay on the 45th
day. What is the company's cost of forgoing the cash discount?
Student Response
18.6%
A.
B.
21.28% 100%
C.
D.
Value
24.83%
Score: 1/1
7.
If a company has good credit standing with a bank, it will be charged ______ interest rate margin than/as a
company without an established record.
Student Response
A.
a higher
B.
a lower 100%
C.
D.
Value
a much higher
the same
Score: 1/1
8.
A.
B.
C.
Which maturity date is NOT likely for a bank bill?

Student Response
30 days
90 days
180 days
2010 Sem1 Quiz3
Value
12
D.
360 days
100%
Score: 1/1
9.
A company is likely to issue a bank bill if it wants:
Student Response
Value
A.
long-term financing
B.
C.
100%
D.
Score: 1/1
10.
In relation to a bank bill, endorsement means:
Student Response
Value
A.
that the acceptor and endorser make an agreement as to who is liable for the repayment of the face value to
the final holder of the bill
B.
if the acceptor cannot repay the face value to the holder at maturity, it must draw a bill to meet its
obligations
C.
the endorser has a contingent liability when the bill matures
100%
D.
the drawer agrees to pay an additional fee to the acceptor for guaranteeing the repayment
Score: 1/1
11.
The lender who registers a mortgage as a security for a loan is the:
Student Response
A.
mortgagor
B.
mortgagee
100%
C.
D.
Value
mortgager
mortgage
Score: 1/1
12.
A security backed by real estate is a/an:
2010 Sem1 Quiz3
13
Student Response
debenture
income bond
A.
B.
C.
mortgage bond
D.
Value
100%
fixed-charge debenture
Score: 1/1
13.
charge.
A.
B.
When a company defaults on interest payments for a debenture, the floating charge is said to ______ a fixed
Student Response
transform into
crystallise into
Value
C.
originate as
D.
adjust to
0%
Score: 0/1
14.
A debenture is a/an:
Student Response
Value
unsecured bond that only best-name corporate borrowers can issue
legal document stating the restrictive covenants on the loan
A.
B.
C.
bond secured by a charge over the assets of the issuer
D.
100%
corporate bond with a credit enhancement
Score: 1/1
15.
One of the advantages of a prime rate set by a financial institution is that it is less likely to be affected by:
Student Response
Value
A.
B.
C.
D.
100%

Score: 1/1
1.
2010 Sem1 Quiz3
14
years.
If you invest _______ to earn simple interest of 6.8% per year, you will receive $12 375 at the end of two
Student Response
A.
$4759.62
B.
$5156.25
C.
$9728.77
D.
$10 893.49
100%
Value
Score: 1/1
2.
What is the present value of the following cash flow stream, discounted at 6.5% per annum, compounded
monthly?
Year 1: $1000; Year 2: $1500; Year 3: $2000; Year 4: $2500
Student Response
A.
$5844.58
100%
B.
C.
D.
Value
$5863.11
$5874.79
$5986.23
Score: 1/1
3.
If you are saving for an overseas trip and put $400 every month into an account paying 6.8% per annum,
compounding monthly, how much will you have at the end of 3.25 years?
Student Response
A.
$5014.43
B.
$16 907.41
C.
$17 001.84
D.
$17 403.22
100%
Value
Score: 1/1
4.
What is the simple annualised interest rate on a company transaction to raise $100 000 financing by drawing a
bank bill with a face value of $104 000, payable in 120 days?
Student Response
A.
4%
B.
12%
C.
12.17% 100%
2010 Sem1 Quiz3
Value
15
D.
12.67%
Score: 1/1
5.
A finite stream of regular cash flows over a given period is known as a/an:
Student Response
A.
perpetuity
B.
annuity 100%
C.
D.
Value
debenture
allowance
Score: 1/1
6.
The role of a lead manager for a promissory note issuance program is to:
A.
B.
Student Response
Value
provide the funds to the issuer
act as an arranger of the debt issue
C.
act as an underwriting syndicate and purchase paper not taken up by the market
D.
provide a supporting guarantee for the issue
0%
Score: 0/1
7.
One of the advantages to the corporation of an underwriting syndicate for the issue of promissory notes is:
A.
B.
Student Response
Value
they approve the prospectus before distribution to the public
the syndicate submits a combined bid for purchase that the corporation compares with other bids
C.
the syndicate monitors and coordinates the actions of the different underwriters
D.
the underwriting commitment gives the corporation access to a line of credit extending beyond the life of the
promissory note 100%
Score: 1/1
8.
For a commercial bill, the interest rate is quoted as a/an:
A.
Student Response
annual percentage rate
2010 Sem1 Quiz3
Value
16
B.
compounded annual rate 0%
C.
effective rate
D.
holding period yield
Score: 0/1
9.
________ is a short-term, unsecured discount note issued by corporate borrowers of high credit standing.
The major banks generally issue these notes on their behalf.
Student Response
A.
A line of credit
B.
Commercial paper
100%
C.
D.
Value
A revolving line of credit

A fully drawn advance
Score: 1/1
10.
The _______ is the party that lends the funds in a commercial bill transaction.
Student Response
A.
acceptor
B.
discounter
100%
C.
D.
Value
drawer
endorser
Score: 1/1
11.
All of the following are examples of long-term debt instruments EXCEPT:
Student Response
A.
term loans
B.
debentures
C.
promissory notes100%
D.
Value
bonds
Score: 1/1
12.
The type of lease where the costs of ownership and operation are borne by the lessee, who agrees to make a
residual payment at the end of the lease period, is a/an:
2010 Sem1 Quiz3
17
Student Response
direct lease
A.
B.
financial lease
C.
D.
Value
100%
operating lease
leveraged lease
Score: 1/1
13.
A company has two outstanding bonds with the same features, apart from their coupon. Bond A has a coupon of
5%, while bond B has a coupon of 8%. If the market interest rate changes by 10%:
Student Response
Value
A.
bond A will have the greater change in price
100%
B.
C.
D.
bond B will have the greater change in price

the price of the bonds will not alter
the price of the bonds will change by the same amount
Score: 1/1
14.
Bonds are:
Student Response
Value
A.
B.
C.
D.
100%
Score: 1/1
15.
The main longer-term finance provided by financial intermediaries is:

Student Response
commercial paper
corporate bonds
A.
B.
C.
D.
term loans
Value
100%
Score: 1/1
2010 Sem1 Quiz3
18
1.
Calculate the effective annual interest rate if your bank quotes you 10% per annum, compounded quarterly.
A.
B.
C.
D.
Student Response
14.01%
10.38% 100%
10%
2.50%
Value
Score: 1/1
2.
The present value of an ordinary annuity with equal monthly payments of $300 over the next four years,
assuming market interest rates are 12% per annum, is:
A.
B.
C.
D.
Student Response
$911.20
$1170.59
$11 392.19
100%
$18 366.78
Value
Score: 1/1
3.
A.
B.
C.
D.
Calculate the effective annual interest rate if you are quoted 8% per annum, compounded half yearly.
Student Response
8.27%
8.16% 100%
8.0%
4.0%
Value
Score: 1/1
4.
A.
B.
C.
D.
An $8000 bank deposit earning compound interest of 8.21% per annum grows to _______ in 5.25 years.
Student Response
$11 284.00
$12 058.14
$12 105.81
100%
$16 019.15
Value
Score: 1/1
5.
If you receive $10 000 back as principal and interest at the end of two years for an initial investment of
$9127 at the start of the term, what is the yield on your investment?
Student Response
2010 Sem1 Quiz3
Value
19
A.
B.
C.
D.
4.37% per
4.78% per
8.73% per
9.57% per
annum
annum100%
annum
annum
Score: 1/1
6.
A.
B.
C.
D.
A major advantage of a bill financing facility is that it:

Student Response
Value
lowers the acceptor's fees for a bank bill
lowers the drawer's cost in drawing up the bill
allows businesses to access financing at a lower cost than overdrafts
lowers the discounter's fee for taking on risks associated with the bill
100%
Score: 1/1
7.
A.
B.
C.
D.
Most agreements involving factoring of accounts receivable are made on a _______ basis.
Student Response
non-recourse
notification
100%
recourse
non-notification
Value
Score: 1/1
8.
A.
B.
C.
D.
Compared with bill financing, commercial paper financing offers a large company:
Student Response
Value
100%
Score: 1/1
9.
The interest rate charged on an unsecured short-term loan to a company is generally ________ the interest
rate on a secured loan.
A.
B.
C.
D.
Student Response
lower than
the same as
higher than
100%
unrelated to
Value
Score: 1/1
2010 Sem1 Quiz3
20
10.
A.
B.
C.
D.

Student Response
Value
long-term financing
0%
Score: 0/1
11.
A.
B.
C.
D.
When a lender includes conditions in a loan agreement to protect its loan, these are known as:
Student Response
loan agreements
loan covenants 100%
loan terms
loan actions
Value
Score: 1/1
12.
A.
B.
C.
D.
A term loan is:

Student Response
Value
a bill issued to finance a specific trade transaction
a bill issued to raise funds for general purposes
a flexible funding arrangement for companies
when funds are borrowed for a set period 100%
Score: 1/1
13.
The type of loan where a company pays periodic interest payments over its term and the principal at maturity
is called:
A.
B.
C.
D.
Student Response
amortised
a debit foncier
deferred payment
interest-only
0%
Value
Score: 0/1
14.
________ has generally no charge over the issuing company's unpledged assets.
Student Response
2010 Sem1 Quiz3
Value
21
A.
B.
C.
D.
A debenture
A subordinated debenture
A floating charge debenture
An unsecured note
100%
Score: 1/1
15.
A.
B.
C.
D.

Student Response
Value
100%
1.
The present value of an annuity of $11 000, received at the end of every year for ten years, where the
required rate of return is 5.6% per annum, compounded annually, is:
Student Response
A.
$6379.01
B.
$7051.28
C.
$8251.76
D.
$82 517.62
100%
Value
Score: 1/1
2.
Student Response
A.
$835 240.27
B.
$974 372.66
C.
$980 655.56
100%
D.
Value
$1 002 747.25
Score: 1/1
3.

Student Response
A.
borrows funds
2010 Sem1 Quiz3
Value
100%
22
B.
C.
D.

lends surplus funds
Score: 1/1
4.
The main difference between an annuity and an annuity due lies in the:
Student Response
A.
number of payments
B.
C.
D.
Value
100%
interest rate
Score: 1/1
5.
An investor plans to save $1000 per year for the next ten years as a retirement fund, and expects to earn
8.4% per annum, compounded monthly over the period, on all invested funds. How much will the investor have at the end
of ten years?
Student Response
A.
$187 085.48
100%
B.
C.
D.
Value
$296 035.24
$126 882.77
$153 178.10
Score: 1/1
6.
Which of the following statements about bank bills is INCORRECT?
Student Response
Value
A.
B.
C.
D.
Score: 1/1
7.
Which one of the following statements is true?
2010 Sem1 Quiz3
23
A.
B.
C.
Usually,
D.
Student Response
Value
initial buyers of promissory notes hold them until maturity. 0%
Score: 0/1
8.
Upon maturity, the final holder of the bill approaches the _________ for payment.
Student Response
A.
drawer
B.
acceptor
100%
C.
D.
Value
endorser
discounter
Score: 1/1
9.
Which of the following rates serves as a reference interest rate in the United Kingdom?
Student Response
BBSW
Value
A.
B.
LIBOR 100%
C.
D.
USCP
SIBOR
Score: 1/1
10.
A.
B.
When compared with bank bills, commercial paper has the advantage:
Student Response
Value
C.
that an issue of commercial paper often has a rollover facility attached, unlike for bank bills 0%
D.
Score: 0/1
2010 Sem1 Quiz3
24
11.
Bonds are:
Student Response
Value
A.
B.
C.
D.
100%
Score: 1/1
12.
Student Response
Value
A.
B.
100%
C.
D.

Score: 1/1
13.
A.
B.
par
C.
D.
When the coupon rate of a bond is equal to the current market interest rates, a bond will sell at:
Student Response
discount
Value
100%
premium
book value
Score: 1/1
14.
A.
B.
Which of the following statements is correct?

Student Response
Value
Short-term debt instruments are more volatile in price than long-term instruments.
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.
0%
Score: 0/1
2010 Sem1 Quiz3
25
15.
Which of the following is NOT usually an example of restrictive debt covenants?
Student Response
Value
A.
B.
C.
0%
D.
Score: 0/1
1.
An $8000 bank deposit earning compound interest of 8.21% per annum grows to _______ in 5.25 years.
Student Response
A.
$11 284.00
B.
$12 058.14
C.
$12 105.81
100%
D.
Value
$16 019.15
Score: 1/1
2.
A 90-day promissory note with a face value of $500 000 is issued at a yield of 7.789% per annum. Calculate its
price.
Student Response
A.
$379 971.77
B.
$419 442.84
C.
$490 578.08
100%
D.
Value
$490 711.67
Score: 1/1
3.
Student Response
A.
borrows funds 100%
B.
C.
D.
Value

lends surplus funds
2010 Sem1 Quiz3
26
Score: 1/1
4.
If the effective annual interest rate is known to be 16.0% on a debt that has monthly payments, what is the
annual percentage rate?
A.
B.
C.
D.
1.33%
Student Response
16.00%
14.93%
Value
12.45%
0%
Score: 0/1
5.
If you invest $13 500 for 18 months at 6.9% per annum simple interest, what is the value of your
at the end of the 18 months?
Student Response
A.
$14 431.50
B.
$14 897.25
100%
C.
D.
Value
$21 647.25
$22 815.00
Score: 1/1
6.
What is a bill of exchange either accepted or endorsed by a bank called?
Student Response
A.
A commercial bill
B.
A bank bill
100%
C.
D.
Value
A trade bill
A negotiable bill
Score: 1/1
7.
A.
Student Response
18.6%
2010 Sem1 Quiz3
Value
27
B.
21.28%
C.
24.83% 0%
D.
Score: 0/1
8.
As an alternative to issuing a commercial bill for short-term financing, corporations with an excellent credit
standing may:
Student Response
A.
buy commercial paper
B.
issue commercial paper 100%
C.
D.
Value
issue preference shares

issue convertible notes
Score: 1/1
9.
Student Response
Value
A.
B.
C.
D.
100%
Score: 1/1
10.
A.
B.
Which of the following statements about bills is INCORRECT?

Student Response
Value
C.
D.
0%
Score: 0/1
11.
The coupon interest of a bond is calculated based on its _______, and is paid periodically.
2010 Sem1 Quiz3
28
Student Response
A.
market value
B.
book value
C.
face value
100%
D.
Value
surrender value
Score: 1/1
12.
If a company wished to structure its financing so it repaid funds borrowed only when a project had positive
cash flows, it would choose a/an:
Student Response
A.
fully drawn advance
B.
term loan
C.
interest-only loan
D.
deferred payment loan 100%
Value
Score: 1/1
13.
Which of the following is NOT an advantage of leasing from the lessor's perspective (compared with offering
a straight loan)?
Student Response
Value
A.
Leasing has a relatively low default risk.
B.
Administration costs may be lower for a lease than for a straight loan.
C.
The return to the lessor may be higher than for a straight loan.
0%
D.
The lessor may use the funds for other investment opportunities.
Score: 0/1
14.
What is the current price of a debenture with a $500 000 face value, a coupon rate of 9.5% paid semiannually, six years remaining to maturity and market interest rates increased to 14%?
Student Response
A.
$320 149.12
0%
B.
$401 613.48
C.
$410 644.78
D.
Value
$688 638.80
Score: 0/1
2010 Sem1 Quiz3
29
15.
A.
The purpose of debt covenants that ban borrowers from entering into certain types of leases is to:
Student Response
Value
B.
C.
protect the lender in their claim over pledged assets in the event of failure 0%
D.
1.
If you invest $1600 for a year at 6.8% per annum simple interest, how much interest will you earn?
Student Response
A.
$10.80
B.
$108.00 100%
C.
D.
Value
$1088.00
$1708.80
Score: 1/1
2.
If you invest $12 000 for 4.75 years at 7.88% per annum, with interest compounded monthly, what will your
total investment be worth at the end of the period?
Student Response
A.
$12 378.94
B.
$15 476.29
C.
$16 232.40
D.
$17 426.34
100%
Value
Score: 1/1
3.
If you invest $7500 for a year at 7.4% per annum simple interest, what is the value of your investment at the
end of the year?
Student Response
A.
$555.00
B.
$5550.00
C.
$8055.00
100%
2010 Sem1 Quiz3
Value
30
D.
$13 050.00
Score: 1/1
4.
You are considering an investment that will pay a lump sum of $50 000 at the end of six years and you decide
that 9% per annum compounded monthly is an appropriate discount factor. What is the value of the investment in
today's dollar terms?
Student Response
A.
$31 508.48
B.
$32 496.57
0%
C.
$31 934.98
D.
Value
$47 846.89
Score: 0/1
5.
If the effective annual interest rate is known to be 19.4% on a debt that has quarterly payments, what is the
Student Response
A.
19.40%
B.
19.10%
C.
18.13% 100%
D.
Value
18.00%
Score: 1/1
6.
Where a company wants to guarantee all of its issue of commercial paper, it can arrange for it to be:
Student Response
A.
sold by tender
B.
underwritten
100%
C.
D.
Value
sold by tap
Score: 1/1
7.
2010 Sem1 Quiz3
31
A.
B.
Student Response
18.6%
21.28%
Value
C.
24.83% 0%
D.
Score: 0/1
8.
Which of the following is NOT an advantage of factoring?
Student Response
Value
Known cash flows are generated.
Accounts receivable is turned into cash without delay.
The credit and collection department of a company may be eliminated.
A.
B.
C.
D.
The cost of financing is relatively high.
100%
Score: 1/1
9.
Student Response
Value
A.
B.
C.
D.
100%
Score: 1/1
10.
Student Response
lower than
the same as
A.
B.
C.
higher than
D.
Value
100%
unrelated to
Score: 1/1
11.
2010 Sem1 Quiz3
32

Student Response
A.
B.
commercial paper
C.
corporate bonds 0%
D.
term loans
Value
Score: 0/1
12.
A key difference between a positive covenant and a negative covenant is, for a:
Student Response
Value
A.
B.
C.
0%
D.
positive covenant, a company must maintain a minimum debt to gross cash flow ratio
Score: 0/1
13.
Student Response
A.
loan agreements
B.
loan covenants 100%
C.
D.
Value
loan terms
loan actions
Score: 1/1
14.
When the coupon rate of a bond is below the current market interest rates, a bond will sell at:
Student Response
A.
discount100%
B.
C.
D.
Value
par
premium
face value
Score: 1/1
2010 Sem1 Quiz3
33
15.
Student Response
Value
A.
B.
C.
0%
D.
Score: 0/1
1.
If you receive $100 000 back as principal and interest at the end of the year for an initial investment of $93
456 at the start of the year, what interest has been earned on your investment?
A.
B.
C.
7.00%
D.
Student Response
6.54%
65.4%
Value
100%
70.00%
Score: 1/1
2.
Student Response
A.
$83 067.50
B.
$90 092.50
C.
$95 498.05
0%
D.
$96 071.04
Value
Score: 0/1
3.
Student Response
A.
$941.65
B.
$999.96
C.
$1016.26
100%
2010 Sem1 Quiz3
Value
34
D.
$1049.54
Score: 1/1
4.
If you invest $13 500 for 18 months at 6.9% per annum simple interest, what is the value of your investment
Student Response
A.
$14 431.50
B.
$14 897.25
100%
C.
D.
Value
$21 647.25
$22 815.00
Score: 1/1
5.
If the interest rate is 7.4% per annum, compounding quarterly, what is the future value of a six-year ordinary
Student Response
A.
$28 903.12
B.
$85 938.40
C.
$62 647.89
D.
$103 126.09
100%
Value
Score: 1/1
6.
Where a company wants to guarantee all of its issue of commercial paper, it can arrange for it to be:
Student Response
A.
sold by tender
B.
underwritten
100%
C.
D.
Value
sold by tap
Score: 1/1
7.
A.
The major banks lend unsecured short-term funds in the following three basic ways:
Student Response
Value
overdraft, bill financing, commercial paper
2010 Sem1 Quiz3
35
B.
overdraft, bill financing, fully drawn advances
C.
overdraft, commercial paper, cash advances
D.
commercial paper, negotiable certificates of deposit, overdraft
0%
Score: 0/1
8.
When a company has a deal with a bank lender that allows access to short-term funds, this is called:
Student Response
A.
a debt facility
B.
C.
D.
Value
a debt provision
Score: 1/1
9.
Student Response
A.
non-recourse
B.
notification
100%
C.
D.
Value
recourse
non-notification
Score: 1/1
10.
A company has directly placed an issue of commercial paper that has a maturity of 90 days, with a face value
of $100 000 yielding 8.25% per annum. What amount would the company raise on the issue?
Student Response
A.
$83 096.19
B.
$91 750.00
C.
$97 965.75
D.
$98 006.31
100%
Value
Score: 1/1
11.
A company issues a long-term debt security with specified interest payments and fixed charges over unpledged
assets. What type of security has been issued?
2010 Sem1 Quiz3
36
Student Response
A.
Subordinated debt
B.
Unsecured notes
C.
Commercial mortgage
D.
Debenture
100%
Value
Score: 1/1
12.
What is the current price of a debenture with a $500 000 face value, a coupon rate of 9.5% paid semiannually, six years remaining to maturity and market interest rates increased to 14%?
Student Response
A.
$320 149.12
B.
$401 613.48
C.
$410 644.78
100%
D.
Value
$688 638.80
Score: 1/1
13.
The market price of previously issued bonds is often different from face value because:
Student Response
Value
A.
the coupon rate has altered
B.
the maturity date has altered
C.
the market rate of interest has altered
D.
100%
previously issued bonds sell at a discount to new bonds
Score: 1/1
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?
A.
Student Response
$915.39
B.
$1000
C.
$1089.72
D.
Value
0%
Score: 0/1
2010 Sem1 Quiz3
37
15.
A company can borrow from a bank at a margin to the bank's base rate. All of the following affect this margin
EXCEPT:
Student Response
Value
A.
B.
C.
D.
100%
Score: 1/1
View Attempt 1
Title: Quiz 3
Started:
Submitted:
Time spent:
Total score:
of 1
6 May 2010 14:18
6 May 2010 14:35
00:17:33
14/15 = 93.3333% Total score adjusted by 0.0 Maximum possible score: 15
1.
A bank bill with a face value of $500 000 and 90 days to maturity is purchased with a yield to maturity of
6.92% per annum. After the bill has been held for 28 days, it is sold at a yield of 6.78% per annum. What is the holding
period yield for the holder of the note?
Student Response
3.23% per annum
7.11% per annum
A.
B.
C.
D.
Value
7.51% per annum
Score: 1/1
2.
Student Response
A.
borrows funds 100%
B.
Value
2010 Sem1 Quiz3
38
C.
D.
lends surplus funds

Score: 1/1
3.
Student Response
A.
$83 067.50
B.
$90 092.50
C.
$95 498.05
D.
$96 071.04
100%
Value
Score: 1/1
4.
Student Response
A.
$835 240.27
B.
$974 372.66
C.
$980 655.56
100%
D.
Value
$1 002 747.25
Score: 1/1
5.
Student Response
A.
$941.65
B.
$999.96
C.
$1016.26
100%
D.
Value
$1049.54
Score: 1/1
6.
Student Response
2010 Sem1 Quiz3
Value
39
A.
18.6%
B.
21.28% 100%
C.
D.
24.83%
Score: 1/1
7.
Student Response
a higher
A.
B.
a lower 100%
C.
D.
Value
a much higher
the same
Score: 1/1
8.
Which maturity date is NOT likely for a bank bill?
Student Response
A.
30 days
B.
90 days
C.
180 days
D.
360 days
100%
Value
Score: 1/1
9.
Student Response
Value
A.
long-term financing
B.
C.
100%
D.
Score: 1/1
10.
2010 Sem1 Quiz3
40
Student Response
Value
A.
B.
obligations
C.
100%
D.
Score: 1/1
11.
Student Response
A.
mortgagor
B.
mortgagee
100%
C.
D.
Value
mortgager
mortgage
Score: 1/1
12.
Student Response
A.
debenture
B.
income bond
C.
mortgage bond 100%
D.
Value
Score: 1/1
13.
charge.
A.
B.
When a company defaults on interest payments for a debenture, the floating charge is said to ______ a fixed
Student Response
transform into
crystallise into
Value
C.
originate as
D.
adjust to
0%
2010 Sem1 Quiz3
41
Score: 0/1
14.
Student Response
Value
A.
B.
C.
100%
D.
Score: 1/1
15.
Student Response
Value
A.
B.
100%
C.
D.

Score: 1/1
1.
years.
Student Response
A.
$4759.62
B.
$5156.25
C.
$9728.77
D.
$10 893.49
100%
Value
Score: 1/1
2.
What is the present value of the following cash flow stream, discounted at 6.5% per annum, compounded
monthly?
Year 1: $1000; Year 2: $1500; Year 3: $2000; Year 4: $2500
Student Response
A.
$5844.58
100%
B.
Value
$5863.11
2010 Sem1 Quiz3
42
C.
D.
$5874.79
$5986.23
Score: 1/1
3.
Student Response
A.
$5014.43
B.
$16 907.41
C.
$17 001.84
D.
$17 403.22
100%
Value
Score: 1/1
4.
What is the simple annualised interest rate on a company transaction to raise $100 000 financing by drawing a
bank bill with a face value of $104 000, payable in 120 days?
Student Response
A.
4%
B.
12%
C.
12.17% 100%
D.
Value
12.67%
Score: 1/1
5.
A finite stream of regular cash flows over a given period is known as a/an:
Student Response
A.
perpetuity
B.
annuity 100%
C.
D.
Value
debenture
allowance
Score: 1/1
6.
A.
Student Response
Value
2010 Sem1 Quiz3
43
B.
C.
D.
0%
Score: 0/1
7.
A.
B.
Student Response
Value
C.
D.
Score: 1/1
8.
For a commercial bill, the interest rate is quoted as a/an:
A.
Student Response
annual percentage rate
Value
B.
compounded annual rate 0%
C.
effective rate
D.
holding period yield
Score: 0/1
9.
________ is a short-term, unsecured discount note issued by corporate borrowers of high credit standing.
The major banks generally issue these notes on their behalf.
Student Response
A line of credit
A.
B.
Commercial paper
C.
D.
Value
100%

Score: 1/1
10.
2010 Sem1 Quiz3
44
The _______ is the party that lends the funds in a commercial bill transaction.
Student Response
A.
acceptor
B.
discounter
100%
C.
D.
Value
drawer
endorser
Score: 1/1
11.
Student Response
A.
term loans
B.
debentures
C.
D.
Value
bonds
Score: 1/1
12.
Student Response
A.
direct lease
B.
financial lease 100%
C.
D.
Value
operating lease
leveraged lease
Score: 1/1
13.
Student Response
Value
A.
100%
B.
C.
D.

Score: 1/1
2010 Sem1 Quiz3
45
14.
Bonds are:
Student Response
Value
A.
B.
C.
D.
100%
Score: 1/1
15.
Student Response
A.
B.
commercial paper
C.
corporate bonds
D.
term loans
100%
Value
Score: 1/1
1.
What is the current price of an existing Treasury bond that pays a fixed coupon of 6.4% per annum per $100
face value, compounding half-yearly, and maturing in four years? Current market yields are 6.8% per annum.
Student Response
A.
$22.0888
B.
$44.1775
C.
$76.5307
D.
$98.6195
100%
Value
Score: 1/1
2.
A company invests its surplus funds by buying a commercial bill with a face value of $100 000, at a current
yield to maturity of 7.35% per annum and 120 days to maturity. After 45 days, the bill is sold at a yield of 6.84% per
annum. What rate of return did the company earn on the bill?
Student Response
A.
4.85% per annum
B.
8.01% per annum
C.
8.09% per annum100%
2010 Sem1 Quiz3
Value
46
D.
8.90% per annum
Score: 1/1
3.
You are considering an investment that will pay a lump sum of $50 000 at the end of six years and you decide
that 9% per annum compounded monthly is an appropriate discount factor. What is the value of the investment in
today's dollar terms?
Student Response
A.
$31 508.48
B.
$32 496.57
C.
$31 934.98
100%
D.
Value
$47 846.89
Score: 1/1
4.
If you make an investment and agree to pay regular monthly payments of $450 at the end of the next twelve
months, starting one month from today, what is the present value of this investment if the interest rate is 8.4% per
annum compounded monthly?
Student Response
A.
$3322.06
B.
$4916.30
C.
$5162.12
100%
D.
Value
$5198.25
Score: 1/1
5.
Student Response
A.
$28 903.12
B.
$85 938.40
C.
$62 647.89
D.
$103 126.09
100%
Value
Score: 1/1
6.
Upon maturity, the final holder of the bill approaches the _________ for payment.
2010 Sem1 Quiz3
47
Student Response
drawer
A.
B.
acceptor
C.
D.
Value
100%
endorser
discounter
Score: 1/1
7.
As an alternative to issuing a commercial bill for short-term funds, a corporation may:
Student Response
buy a promissory note
Value
A.
B.
issue a convertible note 0%
C.
use the cash advance facility of an investment bank
D.
issue a negotiable certificate of deposit
Score: 0/1
8.
When a party endorses a bank bill, it:
A.
B.
Student Response
Value
repays the face value of the bill to the holder at maturity
creates a liability for payment of the bill
C.
provides the funds to the seller
D.
provides the funds to the discounter of the bill
0%
Score: 0/1
9.
A revolving facility for a promissory note issue usually:
Student Response
Value
A.
has a lead manager to organise the issuance
100%
B.
C.
D.
offers corporations funding for 180 days

gives the issuer the right to cancel the program, subject to 90 days' notice
has only an underwriter
Score: 1/1
10.
Promissory notes have a decided advantage over bills in that:
2010 Sem1 Quiz3
48
Student Response
Value
A.
they are liquid 0%
B.
an issuer of a promissory note does not incur a contingent liability
C.
D.
a borrower without a strong name in the markets does not need bank endorsement
sole liability to repay the face value at maturity belongs to the underwriting bank(s)
Score: 0/1
11.
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?
Student Response
A.
$1000
B.
$1045.84
C.
$1046.44
100%
D.
Value
$1079.45
Score: 1/1
12.
Student Response
A.
debenture
B.
income bond
C.
mortgage bond 100%
D.
Value
Score: 1/1
13.
The borrower who issues a mortgage with real property as collateral to the bank is the:
A.
Student Response
mortgagor
Value
B.
mortgagee
0%
C.
mortgager
D.
mortgage
Score: 0/1
2010 Sem1 Quiz3
49
14.
If a company wishes to finance a printing press with a five-year life, it would be advisable to finance it with
a/an:
Student Response
A.
overdraft
B.
bank bill
C.
commercial paper
D.
fully drawn advance
100%
Value
Score: 1/1
15.
Which type of financial claim is not satisfied until those of the creditors holding certain senior debts have
been fully satisfied?
Student Response
Value
A.
Mortgage bonds
B.
Unsecured notes 0%
C.
Subordinated debentures
D.
Deferred interest debentures
Score: 0/1
1.
A company invests its surplus funds by buying a commercial bill with a face value of $100 000, at a current
yield to maturity of 7.35% per annum and 120 days to maturity. After 45 days, the bill is sold at a yield of 6.84% per
annum. What rate of return did the company earn on the bill?
Student Response
A.
4.85% per annum
B.
8.01% per annum
C.
8.09% per annum100%
D.
Value
8.90% per annum
Score: 1/1
2.
years.
A.
B.
C.
D.
Student Response
$4759.62
$5156.25
$9728.77
2010 Sem1 Quiz3
Value
50
$10 893.49
100%
Score: 1/1
3.
Student Response
A.
$5014.43
B.
$16 907.41
C.
$17 001.84
D.
$17 403.22
100%
Value
Score: 1/1
4.
The main difference between an annuity and an annuity due lies in the:
Student Response
A.
number of payments
B.
C.
D.
Value
100%
interest rate
Score: 1/1
5.
Student Response
A.
$28 903.12
B.
$85 938.40
C.
$62 647.89
D.
$103 126.09
100%
Value
Score: 1/1
6.
A.

Student Response
Value
2010 Sem1 Quiz3
51
B.
C.
D.
100%
Score: 1/1
7.
Student Response
Value
A.
they are liquid 0%
B.
C.
D.
Score: 0/1
8.
A.
B.
Student Response
Value
C.
D.
Score: 1/1
9.
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?
Student Response
A.
$230 875
B.
$250 000
C.
$256 287.67
100%
D.
Value
$312 876.71
Score: 1/1
2010 Sem1 Quiz3
52
10.
Which of the following is NOT a feature of promissory notes?
Student Response
Value
A.
They are issued at discount to face value. 0%
B.
A typical P-note facility issue program is a revolving facility.
C.
A company may pay an additional fee to the underwriter for endorsing the issue.
D.
Only the largest and most creditworthy corporations issue them.
Score: 0/1
11.
Student Response
A.
mortgagor
B.
mortgagee
100%
C.
D.
Value
mortgager
mortgage
Score: 1/1
12.
All of the following affect interest rates charged on term loans EXCEPT:
Student Response
Value
A.
default risk
B.
the maturity
0%
C.
the repayment schedule
D.
refinancing risk
Score: 0/1
13.
Long-term debt can be categorised as financing with an initial maturity:
Student Response
Value
A.
over 180 days and less than a year
B.
between 1 and 3 years
C.
over 1 year
100%
D.
Score: 1/1
2010 Sem1 Quiz3
53
14.
A company borrows $125 000 from a bank at 7.2% per annum to be amortised over six years. The monthly
instalment is:
Student Response
A.
$1861.11
B.
$2143.15
100%
C.
D.
Value
$7274.21
$26 386.61
Score: 1/1
15.
If the rates on shorter -term -to maturity deposits are higher than those of longer term deposits, it is likely
that the costs for the longer term financing for a company are:
A.
B.
lower
C.
D.
Student Response
higher
Value
100%
the same
not related
Score: 1/1
1.
A.
The idea of compound interest refers to:

Student Response
Value
the payment of interest on previously earned interest
B.
investing for multiple periods in one year 0%
C.
earning interest only on the initial investment
D.
changing interest rates during an investment
Score: 0/1
2.
The market convention to use a 360-day year in the financial markets applies in:
Student Response
Value
A.
the United Kingdom
B.
Australia
C.
the United Kingdom and euromarkets
D.
the United States and euromarkets
100%
2010 Sem1 Quiz3
54
Score: 1/1
3.
When a company sells a commercial bill, this means the company:
Student Response
A.
lends funds
B.
lends a commercial bill
C.
issues a commercial bill 100%
D.
Value
invests in a commercial bill
Score: 1/1
4.
If you borrow $100 000 for 90 days with simple interest of 6.2% per annum, what is the total amount of
interest paid on the loan?
Student Response
A.
$1528.77
100%
B.
C.
D.
Value
$6200.00
$6200.00
$15 287.67
Score: 1/1
5.
Student Response
A.
$5014.43
B.
$16 907.41
C.
$17 001.84
D.
$17 403.22
100%
Value
Score: 1/1
6.
A supplier who changes its trade credit from 3/10 n/30 to 4/15 n/40 is likely to find:
A.
B.
Student Response
Value
its accounts receivable decrease
2010 Sem1 Quiz3
55
its risk of bad debts reduces

0%
C.
its accounts receivable increase
D.
a decrease in sales
Score: 0/1
7.
Student Response
Value
A.
B.
C.
100%
D.
Score: 1/1
8.
When issuing commercial paper, it is important for a company to have:
Student Response
Value
A.
a party to act as an acceptor and guarantee payment
B.
collateral to attach to the issue
C.
a well-established reputation in the markets
100%
D.
investors organised by the investment bankers to sell the issue
Score: 1/1
9.
Student Response
A.
a higher
B.
a lower 100%
C.
D.
Value
a much higher
the same
Score: 1/1
10.
Which of the following is NOT a feature of promissory notes?
Student Response
2010 Sem1 Quiz3
Value
56
A.
They are issued at discount to face value.
B.
A typical P-note facility issue program is a revolving facility.
C.
A company may pay an additional fee to the underwriter for endorsing the issue.
D.
100%
Only the largest and most creditworthy corporations issue them.
Score: 1/1
11.
When illiquid assets are transformed into new asset-backed securities, the process is called:
Student Response
A.
conversion
B.
liquidisation
C.
securitisation
100%
D.
Value
transformation
Score: 1/1
12.
Which of the following rates serves as a reference interest rate in Australia?

Student Response
A.
BBSW
100%
B.
C.
D.
LIBOR
USCP
SIBOR
Value
Score: 1/1
13.
Student Response
Value
A.
B.
100%
C.
D.

Score: 1/1
14.
2010 Sem1 Quiz3
57
A.
Student Response
mortgagor
Value
B.
mortgagee
0%
C.
mortgager
D.
mortgage
Score: 0/1
15.
Student Response
A.
direct lease
B.
financial lease 100%
C.
D.
Value
operating lease
leveraged lease
Score: 1/1
1.
What is the current price of a financial security that pays a fixed coupon of 10.2% per annum per $100 face
value, compounding half-yearly and maturing in four years, when current yields in the market are 8.6% per annum?
Student Response
A.
$103.9575
Value
100%
B.
$70.3185
C $103.887
D. $132.8295
Score: 1/1
2.
Student Response
A.
$28 903.12
B.
$85 938.40
C.
$62 647.89
D.
$103 126.09
100%
Value
Score: 1/1
2010 Sem1 Quiz3
58
3.
A bank bill with a face value of $500 000 and 90 days to maturity is purchased with a yield to maturity of
6.92% per annum. After the bill has been held for 28 days, it is sold at a yield of 6.78% per annum. What is the holding
period yield for the holder of the note?
Student Response
A.
3.23% per annum
B.
7.11% per annum
C.
D.
Value
7.51% per annum
Score: 1/1
4.
Calculate the effective annual interest rate corresponding to 9.6% per annum, compounded monthly.
Student Response
A.
10.03% 100%
B.
C.
D.
Value
9.6%
8.0%
6.9%
Score: 1/1
5.
The present value of an annuity of $11 000, received at the end of every year for ten years, where the
required rate of return is 5.6% per annum, compounded annually, is:
Student Response
A.
$6379.01
B.
$7051.28
C.
$8251.76
D.
$82 517.62
100%
Value
Score: 1/1
6.
Which of the following statements about the issuing of a commercial bill is FALSE?
Student Response
Value
A.
They are sold at discount to face value.
B.
A bank may accept them.
C.
The drawer is the party that issues the bill.
D.
The discounter is the party that borrows the funds.
100%
2010 Sem1 Quiz3
59
Score: 1/1
7.
A.
B.
C.
12.4%
D.
The annual cost of forgoing a cash discount under the terms of sale 2/30 n/90, assuming a 365-day year is:
Student Response
8.0%
12.2%
Value
100%
24.0%
Score: 1/1
8.
When compared with bank bills, commercial paper has the advantage:
Student Response
Value
A.
B.
C.
that an issue of commercial paper often has a rollover facility attached, unlike for bank bills
D.
100%
Score: 1/1
9.
With regard to a rollover bill financing facility the:
A.
B.
C.
Student Response
Value
bank agrees to sell commercial bills drawn by the borrower for unspecified amounts
bank agrees to sell commercial bills drawn by the borrower up to a specified limit
discounter agrees to sell commercial bills drawn by the borrower up to a specified limit
D.
100%
Score: 1/1
10.
Student Response
Value
A.
2010 Sem1 Quiz3
60
B.
obligations
C.
100%
D.
Score: 1/1
11.
instalment is:
Student Response
A.
$1861.11
B.
$2143.15
100%
C.
D.
Value
$7274.21
$26 386.61
Score: 1/1
12.
Student Response
Value
A.
100%
B.
C.
D.

Score: 1/1
13.
Which of the following is NOT an example of negative debt covenants?
Student Response
Value
A.
Specifying a minimum debt service cover. 0%
B.
Restrictions on amalgamation with other companies.
C.
Supplying creditors with annual audited reports.
D.
Limiting annual dividend payments to shareholders.
Score: 0/1
2010 Sem1 Quiz3
61
14.
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:
A.
B.
C.
Student Response
increases to 8%
increases to 9%
remains at 7%
D.
increases to just below 9%
Value
0%
Score: 0/1
15.
Twenty years ago, banks:
Student Response
Value
A.
could make mortgage loans to households but not to businesses
B.
could make loans to businesses but not make mortgage loans
C.
held most loans on their books until they were paid off
100%
D.
repackaged and sold most loans to investors
Score: 1/1
1.
If the effective annual interest rate is known to be 16.0% on a debt that has monthly payments, what is the
A.
B.
C.
D.
Student Response
16.00%
14.93% 100%
12.45%
1.33%
Value
Score: 1/1
2.
If the interest rate is 6.9% per annum, compounded annually, what is the future value of a five-year ordinary
annuity with yearly payments of $4000?
A.
B.
C.
D.
Student Response
$5584.04
$18 709.07
$22 957.10
100%
$30 984.06
Value
Score: 1/1
2010 Sem1 Quiz3
62
3.
If the current yield on 180-day Treasury notes is 6.42% per annum, what price per $100 of face value would an
investor be prepared to pay to purchase them?
A.
B.
C.
D.
Student Response
$75.95
$96.93 0%
$96.94
$99.98
Value
Score: 0/1
4.
The present value of an ordinary annuity with equal monthly payments of $300 over the next four years,
assuming market interest rates are 12% per annum, is:
A.
B.
C.
D.
Student Response
$911.20 0%
$1170.59
$11 392.19
$18 366.78
Value
Score: 0/1
5.
What is the price today of an investment that will pay the single sum of $20 000 after three -and -a half
years if the discount rate is 7.64% per annum, compounded annually?
A.
B.
C.
D.
Student Response
$2743.37
$15 456.89
$15 780.00
0%
$16 036.48
Value
Score: 0/1
6.
A.
B.
C.
D.
Student Response
non-recourse
notification
100%
recourse
non-notification
Value
Score: 1/1
7.
Student Response
2010 Sem1 Quiz3
Value
63
A.
B.

C.
D.
100%
Score: 1/1
8.
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?
A.
B.
C.
D.
Student Response
$81 728.61
$89 945.79
$97 813.27
$98 894.55
100%
Value
Score: 1/1
9.
Commercial paper is generally sold at a discount from:
A.
B.
C.
D.
Student Response
the prime rate
its face value
100%
its cost
Treasury notes
Value
Score: 1/1
10.
The benchmark or reference rate of interest for overdrafts varies directly with:
A.
B.
C.
D.
Student Response
Value
demand for funds in the bond markets
varying demand and supply for funds in the short-term markets
varying demand and supply for funds in the long-term markets
changing asset prices
100%
Score: 1/1
11.
A ________ is provided to a business by a financial institution and has a maturity of more than one year.
A.
B.
C.
D.
Student Response
debenture
mortgage bond
term loan
100%
zero-coupon bond
2010 Sem1 Quiz3
Value
64
Score: 1/1
12.
A.
B.
C.
D.

Student Response
Value
100%
Score: 1/1
13.
A.
B.
C.
D.
When the market interest rates decline after a bond is issued, the:
Student Response
Value
face value of the bond decreases
market value of the bond increases
100%
market value of the bond decreases
bond price is at a discount
Score: 1/1
14.
A.
B.
C.
D.
When the coupon rate of a bond is equal to the current market interest rates, a bond will sell at:
Student Response
discount
par
100%
premium
book value
Value
Score: 1/1
15.
A.
B.
C.
D.

Student Response
Value
over 1 year
100%
Score: 1/1
1.
2010 Sem1 Quiz3
65
Student Response
A.
$5584.04
0%
B.
$18 709.07
C.
$22 957.10
D.
Value
$30 984.06
Score: 0/1
2.
Student Response
A.
$5014.43
B.
$16 907.41
C.
$17 001.84
D.
$17 403.22
100%
Value
Score: 1/1
3.
Student Response
A.
$835 240.27
B.
$974 372.66
C.
$980 655.56
100%
D.
Value
$1 002 747.25
Score: 1/1
4.
What is the price today of an investment that will pay the single sum of $20 000 after three -and -a half
years if the discount rate is 7.64% per annum, compounded annually?
Student Response
A.
$2743.37
B.
$15 456.89
100%
C.
D.
Value
$15 780.00
$16 036.48
Score: 1/1
2010 Sem1 Quiz3
66
5.
What is the future value in six years of $10 000 invested today, compounding at 6.87% per annum?
Student Response
A.
$14 122.00
B.
$14 898.24
100%
C.
D.
Value
$15 128.26
$23 051.04
Score: 1/1
6.
When an issuer of commercial paper issue fails to raise the funds, this most likely means the:
Student Response
Value
A.
company is in default
B.
issue is underpriced
C.
underwriter must purchase unsold notes
D.
100%
issuer must establish a rollover facility for the remaining notes
Score: 1/1
7.
When a company finances its short-term assets with short-term debt, this is known as the:
Student Response
A.
identical principle
B.
equalisation theory
C.
corresponding principle
D.
matching principle
100%
Value
Score: 1/1
8.
Student Response
A.
18.6%
B.
21.28% 100%
C.
D.
Value
24.83%
2010 Sem1 Quiz3
67
Score: 1/1
9.
Which of the following statements regarding a bank bill is correct?
A.
Student Response
Value
It is not usually endorsed after it is sold for the second time in the secondary market.
B.
C.
Other financial institutions can accept bank bills.

It may be both bank-accepted and bank-endorsed.
D.
A bank-accepted bill tends to trade at a slightly deeper discount than bank-endorsed bills.
0%
Score: 0/1
10.
Student Response
Value
A.
B.
creates a liability for payment of the bill 100%
C.
D.

Score: 1/1
11.
An unsecured note differs from a debenture in that it has:
Student Response
Value
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
100%
Score: 1/1
12.
Student Response
Value
A.
Specifying a minimum debt service cover.
B.
C.
100%
2010 Sem1 Quiz3
68
D.
Score: 1/1
13.
The value of a bond is the present value of the:
A.
B.
C.
D.
coupon
Student Response
Value
dividends and coupon payments
dividends and maturity value
maturity value
payments and maturity value
100%
Score: 1/1
14.
A ________ is provided to a business by a financial institution and has a maturity of more than one year.
Student Response
debenture
mortgage bond
A.
B.
C.
term loan
D.
Value
100%
zero-coupon bond
Score: 1/1
15.
Student Response
A.
mortgagor
B.
C.
D.
Value
100%
mortgagee
mortgager
mortgage
Score: 1/1
1.
A.
B.
C.
Student Response
$5014.43
$16 907.41
$17 001.84
2010 Sem1 Quiz3
Value
69
D.
$17 403.22
100%
Score: 1/1
2.
Calculate the effective annual interest rate if you are quoted 8% per annum, compounded every three months.
A.
B.
8.24%
C.
D.
Student Response
11.10%
Value
100%
8.22%
8.00%
Score: 1/1
3.
If you receive $100 000 back as principal and interest for an investment of $92 368 that you made six months
earlier, what simple rate of interest has been earned on your investment?
A.
B.
15.48%
C.
D.
Student Response
7.63% per annum
Value
per annum
0%
16.16% per annum
16.75% per annum
Score: 0/1
4.
of ten years?
Student Response
A.
$187 085.48
100%
B.
C.
D.
Value
$296 035.24
$126 882.77
$153 178.10
Score: 1/1
5.
Calculate the effective annual interest rate corresponding to 9.6% per annum, compounded monthly.
2010 Sem1 Quiz3
70
Student Response
A.
10.03% 100%
B.
C.
D.
Value
9.6%
8.0%
6.9%
Score: 1/1
6.
Student Response
Value
A.
B.
C.
D.
100%
Score: 1/1
7.
Student Response
A.
non-recourse
B.
notification
100%
C.
D.
Value
recourse
non-notification
Score: 1/1
8.
Student Response
lower than
the same as
A.
B.
C.
higher than
D.
Value
100%
unrelated to
Score: 1/1
9.
2010 Sem1 Quiz3
71
The process of discounting a commercial bill means:
A.
Student Response
Value
a buyer for the bill will provide the financing
B.
a seller for the bill will provide the financing
C.
the borrower has a specified time in which to repay the loan
D.
the acceptor agrees to pay the face value of the bill to the holder at maturity
0%
Score: 0/1
10.
A.
B.
Student Response
BBSW
LIBOR
C.
USCP
D.
0%
SIBOR
Value
Score: 0/1
11.
instalment is:
Student Response
A.
$1861.11
B.
$2143.15
100%
C.
D.
Value
$7274.21
$26 386.61
Score: 1/1
12.
Student Response
Value
A.
B.
C.
100%
D.
Score: 1/1
2010 Sem1 Quiz3
72
13.
Student Response
Value
A.
B.
100%
C.
D.

Score: 1/1
14.
An unsecured note differs from a debenture in that it has:
Student Response
Value
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
100%
Score: 1/1
15.
Which of the following is a positive loan covenant?
Student Response
A.
A minimum working capital ratio
B.
C.
D.
Value
100%
A maximum gearing ratio

A maximum level of unsecured debt
All of the given answers.
Score: 1/1
1.
If your deposit of $30 000 becomes $30 919 at the end of 120 days, what is the annual yield earned?
A.
B.
C.
D.
9.32%
Student Response
9.04%
9.19%
9.23%
Value
100%
Score: 1/1
2010 Sem1 Quiz3
73
2.
A.
B.
8.24%
C.
D.
Calculate the effective annual interest rate if you are quoted 8% per annum, compounded every three months.
Student Response
11.10%
Value
100%
8.22%
8.00%
Score: 1/1
3.
Student Response
A.
$5584.04
B.
$18 709.07
C.
$22 957.10
100%
D.
Value
$30 984.06
Score: 1/1
4.
Student Response
A.
14.01%
B.
10.38% 100%
C.
D.
Value
10%
2.50%
Score: 1/1
5.
If you receive $10 000 back as principal and interest at the end of two years for an initial investment of
$9127 at the start of the term, what is the yield on your investment?
Student Response
A.
4.37% per annum
B.
4.78% per annum100%
C.
Value
8.73% per annum
2010 Sem1 Quiz3
74
D.
9.57% per annum
Score: 1/1
6.
A revolving facility for a promissory note issue usually:
Student Response
Value
A.
has a lead manager to organise the issuance
100%
B.
C.
D.
offers corporations funding for 180 days

gives the issuer the right to cancel the program, subject to 90 days' notice
has only an underwriter
Score: 1/1
7.
Student Response
Value
A.
B.
C.
D.
100%
Score: 1/1
8.
Student Response
they are liquid
Value
A.
B.
C.
D.
100%
Score: 1/1
9.
A negotiable certificate of deposit:
A.
B.
C.
D.
Student Response
Value
is a term deposit because it has a specified maturity date
can be issued by banks to meet their operational liquidity
is a short-term discount security
2010 Sem1 Quiz3
75
All of the given answers. 100%
Score: 1/1
10.
A commercial paper issue where dealers bid competitively for the paper is a/an:
Student Response
A.
tap issuance
B.
tender 100%
C.
D.
Value
offer
proposition
Score: 1/1
11.
Which of the following is NOT an advantage of leasing from the lessee's viewpoint?
Student Response
Value
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 100%
Score: 1/1
12.
Compared with an amortised loan, a deferred repayment loan involves:
Student Response
Value
A.
periodic interest and principal repayments
B.
periodic interest and principal repayments when positive cash flows begin
C.
D.
100%
periodic interest payments and principal repaid at maturity

periodic principal payments and interest repaid at maturity
Score: 1/1
13.
Compared with a company with a strong financial rating, a company with a weaker rating is likely to be charged:
Student Response
Value
A.
LIBOR 0%
B.
LIBOR plus 10 basis points
2010 Sem1 Quiz3
76
C.
D.

Score: 0/1
14.
Banks usually charge a/an _______ for any portion of a term loan that has not been drawn down.
Student Response
A.
establishment fee
B.
service fee
C.
commitment fee 100%
D.
Value
term fee
Score: 1/1
15.
If a bond investor pays $1030 for an annual coupon bond with a face value of $1000, it follows that:
Student Response
Value
A.
the coupon rate is higher than the current market yield
100%
B.
C.
D.
the current market yield and coupon rate are equal

the current market yield is higher than the coupon rate
not enough information is given to compare the coupon rate and current market yield
Score: 1/1
1.
The market convention to use a 360-day year in the financial markets applies in:
Student Response
Value
A.
the United Kingdom
B.
Australia
C.
the United Kingdom and euromarkets
D.
the United States and euromarkets
100%
Score: 1/1
2.
When will a future value calculated with a simple interest rate exceed a future value calculated with compound
interest at the same rate?
Student Response
2010 Sem1 Quiz3
Value
77
A.
When the interest rate exceeds 100% per annum 0%
B.
When the investment period exceeds 50 years
C.
When the initial deposit exceeds $1 billion
D.
This is not possible with positive interest rates
Score: 0/1
3.
If you receive $100 000 back as principal and interest for an investment of $92 368 that you made six months
earlier, what simple rate of interest has been earned on your investment?
Student Response
7.63% per annum
15.48% per annum
16.16% per annum
A.
B.
C.
D.
16.75% per annum
Value
100%
Score: 1/1
4.
If you invest $13 500 for 18 months at 6.9% per annum simple interest, what is the value of your investment
Student Response
$14 431.50
A.
B.
$14 897.25
C.
D.
Value
100%
$21 647.25
$22 815.00
Score: 1/1
5.
of ten years?
Student Response
A.
$187 085.48
100%
B.
C.
D.
Value
$296 035.24
$126 882.77
$153 178.10
Score: 1/1
2010 Sem1 Quiz3
78
6.
Student Response
Value
A.
B.
C.
D.
100%
Score: 1/1
7.
Student Response
Value
A.
B.
C.
100%
D.
Score: 1/1
8.
The basic feature of a/an ________ required by some banks is that it effectively raises the interest cost to
the borrower for an overdraft facility.
Student Response
Value
A.
operating change restriction
B.
compensating balance
100%
C.
D.
commitment fee
annual cleanup
Score: 1/1
9.
Student Response
A.
a higher
B.
a lower 100%
C.
D.
Value
a much higher
the same
2010 Sem1 Quiz3
79
Score: 1/1
10.
Student Response
BBSW
Value
A.
B.
LIBOR 100%
C.
D.
USCP
SIBOR
Score: 1/1
11.
Student Response
A.
loan agreements
B.
loan covenants 100%
C.
D.
Value
loan terms
loan actions
Score: 1/1
12.
A.
B.
bonds
C.
D.
Corporations and governments use long-term debt financing called:

Student Response
retained earnings
Value
100%
shares
preferred stock
Score: 1/1
13.
A company borrows $75 000 from a bank, to be amortised over five years at 8.5% per annum. The annual
instalment is:
Student Response
A.
$12 657.43
B.
$16 275.00
C.
$19 032.43
100%
2010 Sem1 Quiz3
Value
80
D.
Score: 1/1
14.
For what type of lease does the lessee borrow a large part of the funds, typically in a multi-million dollar
arrangement, often with a lease manager, while one or more financial institutions provide the remainder?
Student Response
A.
An equity lease
B.
A leveraged lease
100%
C.
D.
Value
A sale and leveraged lease

A financial lease
Score: 1/1
15.
The purpose of debt covenants that ban borrowers from entering into certain types of leases is to:
Student Response
Value
A.
100%
B.
C.
D.

protect the lender in their claim over pledged assets in the event of failure
Score: 1/1
1.
You are considering an investment that will pay a lump sum of $50 000 at the end of six years and you decide that 9%
per annum compounded monthly is an appropriate discount factor. What is the value of the investment in today's dollar
terms?
A.
Student Response
$31 508.48
Value
B.
$32 496.57
C.
$31 934.98
0%
D.
$47 846.89
Score: 0/1
2.
2010 Sem1 Quiz3
81
Student Response
A.
14.01%
B.
10.38% 100%
C.
D.
Value
10%
2.50%
Score: 1/1
3.
If the current yield on 180-day Treasury notes is 6.42% per annum, what price per $100 of face value would an investor
be prepared to pay to purchase them?
Student Response
A.
$75.95
B.
$96.93
C.
$96.94 100%
D.
Value
$99.98
Score: 1/1
4.
What is the current price of an existing debenture with a face value of $1000 that pays a fixed coupon of 8.4% per
annum, compounded annually, and maturing in five years? Current yields in the market are 6.6% per annum.
Student Response
A.
$941.65
B.
$999.96
C.
$1016.26
100%
D.
Value
$1049.54
Score: 1/1
5.
The present value of an ordinary annuity of $1000 each year for six years, assuming current market interest rates are
5.75% per annum, is:
Student Response
A.
$1625.20
B.
$2982.64
C.
$4596.19
D.
$4956.19
100%
Value
Score: 1/1
2010 Sem1 Quiz3
82
6.
Student Response
Value
A.
B.
obligations
C.
100%
D.
Score: 1/1
7.
Student Response
Value
A.
B.
C.
D.
100%
Score: 1/1
8.
When a company provides goods to a purchaser with payment at the end of the month, this is called:
Student Response
factoring
revolving credit
A.
B.
C.
trade credit
D.
Value
100%
supplier credit
Score: 1/1
9.
When a company has a deal with a bank lender that allows access to short-term funds, this is called:
Student Response
A.
a debt facility
B.
2010 Sem1 Quiz3
Value
83
C.
D.
a debt provision
Score: 1/1
10.
Student Response
Value
A.
B.
creates a liability for payment of the bill 100%
C.
D.

Score: 1/1
11.
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:
Student Response
A.
increases to 8%
B.
increases to 9%
C.
remains at 7% 100%
D.
Value
increases to just below 9%
Score: 1/1
12.
Student Response
Value
A.
B.
C.
over 1 year
100%
D.
Score: 1/1
13.
A.
B.
Student Response
Value
Specifying a minimum debt service cover.
2010 Sem1 Quiz3
84
C.
D.
100%
Score: 1/1
14.
Student Response
Value
A.
B.
C.
D.
100%
Score: 1/1
15.
The coupon interest of a bond is calculated based on its _______, and is paid periodically.
Student Response
A.
market value
B.
book value
C.
face value
100%
D.
Value
surrender value
Score: 1/1
1.
If your investment of $5000 with the bank carries a compound interest of 8.75% per annum, the value of your
investment at the end of three years is:
Student Response
A.
$1430.69
B.
$6312.50
C.
$6430.69
100%
D.
Value
$5437.50
Score: 1/1
2.
2010 Sem1 Quiz3
85
Student Response
$75.95
$96.93
A.
B.
C.
$96.94 100%
D.
Value
$99.98
Score: 1/1
3.
If you invest $12 000 for 4.75 years at 7.88% per annum, with interest compounded monthly, what will your total
investment be worth at the end of the period?
Student Response
A.
$12 378.94
B.
$15 476.29
C.
$16 232.40
D.
$17 426.34
100%
Value
Score: 1/1
4.
What is the future value in six years of $10 000 invested today, compounding at 6.87% per annum?
Student Response
$14 122.00
A.
B.
$14 898.24
C.
D.
Value
100%
$15 128.26
$23 051.04
Score: 1/1
5.
If the effective annual interest rate is known to be 19.4% on a debt that has quarterly payments, what is the annual
percentage rate?
Student Response
A.
19.40%
B.
19.10%
C.
18.13% 100%
D.
Value
18.00%
Score: 1/1
6.
2010 Sem1 Quiz3
86
Which of the following statements about the issuing of a commercial bill is FALSE?
Student Response
Value
A.
They are sold at discount to face value.
B.
A bank may accept them.
C.
The drawer is the party that issues the bill.
D.
The discounter is the party that borrows the funds.
100%
Score: 1/1
7.
________ is a short-term, unsecured discount note issued by corporate borrowers of high credit standing. The major
banks generally issue these notes on their behalf.
Student Response
A.
A line of credit
B.
Commercial paper
100%
C.
D.
Value

Score: 1/1
8.
Which of the following statements about bank bills is INCORRECT?
Student Response
Value
A.
B.
C.
D.
Score: 1/1
9.
The ________ is the benchmark rate of interest charged on loans to a business borrower by a bank.
Student Response
A.
reference rate 100%
B.
C.
D.
Value
commercial paper rate

Treasury rate
overdraft rate
2010 Sem1 Quiz3
87
Score: 1/1
10.
When a business wants to smooth out the timing of its monthly mismatch between cash inflows and outflows and dayto-day working capital requirements, it usually:
Student Response
A.
issues bank bills
B.
arranges an overdraft facility
C.
D.
Value
100%
issues a debenture
issues commercial paper
Score: 1/1
11.
Which of the following types of bond generally has the lowest interest rate?
Student Response
A.
Treasury bonds 100%
B.
C.
D.
Value
Corporate BAA bonds

Semi-government bonds
Corporate ABB bonds
Score: 1/1
12.
The price of a bond with a fixed coupon has a/an _______ relationship with the market interest rates.
Student Response
constant
linear
varying
A.
B.
C.
D.
inverse 100%
Value
Score: 1/1
13.
Student Response
A.
term loans
B.
debentures
C.
2010 Sem1 Quiz3
Value
88
D.
bonds
Score: 1/1
14.
A key difference between a positive covenant and a negative covenant is, for a:
A.
B.
C.
D.
positive
Student Response
Value
covenant, a company must maintain a minimum debt to gross cash flow ratio
100%
Score: 1/1
15.
A company can borrow from a bank at a margin to the bank's base rate. All of the following affect this margin EXCEPT:
Student Response
Value
A.
B.
C.
D.
100%
Score: 1/1
1.
A property investor receives rental payments of $1900 at the start of each month for five years. If the required rate
of return is 7.2% per annum, compounded monthly, what is the value of the property investment today?
Student Response
A.
$83 067.50
B.
$90 092.50
C.
$95 498.05
D.
$96 071.04
100%
Value
Score: 1/1
2.
If you invest $1600 for a year at 6.8% per annum simple interest, how much interest will you earn?
Student Response
$10.80
Value
A.
B.
$108.00 100%
2010 Sem1 Quiz3
89
C.
D.
$1088.00
$1708.80
Score: 1/1
3.
If you invest $13 500 for 18 months at 6.9% per annum simple interest, what is the value of your investment at the end
of the 18 months?
Student Response
A.
$14 431.50
B.
$14 897.25
100%
C.
D.
Value
$21 647.25
$22 815.00
Score: 1/1
4.
Student Response
A.
$75.95
B.
$96.93
C.
$96.94 100%
D.
Value
$99.98
Score: 1/1
5.
The present value of an ordinary annuity of $1000 each year for six years, assuming current market interest rates are
5.75% per annum, is:
Student Response
A.
$1625.20
B.
$2982.64
C.
$4596.19
D.
$4956.19
100%
Value
Score: 1/1
6.
With regard to a rollover bill financing facility the:
2010 Sem1 Quiz3
90
A.
B.
C.
Student Response
Value
bank agrees to sell commercial bills drawn by the borrower for unspecified amounts
bank agrees to sell commercial bills drawn by the borrower up to a specified limit
discounter agrees to sell commercial bills drawn by the borrower up to a specified limit
D.
100%
Score: 1/1
7.
The ________ is the benchmark rate of interest charged on loans to a business borrower by a bank.
Student Response
A.
reference rate 100%
B.
C.
D.
Value
commercial paper rate

Treasury rate
overdraft rate
Score: 1/1
8.
When a company finances its short-term assets with short-term debt, this is known as the:
Student Response
identical principle
equalisation theory
corresponding principle
A.
B.
C.
D.
matching principle
Value
100%
Score: 1/1
9.
Student Response
Value
A.
B.
C.
D.
100%
Score: 1/1
10.
2010 Sem1 Quiz3
91
In relation to a commercial bill, the acceptance fee is the:

Student Response
Value
A.
discounter's fee for taking on the risks associated with discounting the bill
B.
fee for drawing up the bill
C.
fee for taking the liability for paying the holder at maturity
100%
D.
drawer's fee for taking on the risks associated with drawing the bill
Score: 1/1
11.
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?
Student Response
A.
$1000
B.
$1045.84
C.
$1046.44
100%
D.
Value
$1079.45
Score: 1/1
12.
Student Response
A.
term loans
B.
debentures
C.
D.
Value
bonds
Score: 1/1
13.
Which of the following statements about 'net' finance leases is incorrect?
A.
Student Response
Value
The lessor will be responsible for the periodic maintenance of the asset.
B.
At the end of the lease period, the company will be required to make a residual payment.
C.
Upon payment of the residual amount, ownership of the asset transfers to the company.
D.
The lessor's role is one of financing, while the lessee makes regular rental payments. 0%
2010 Sem1 Quiz3
92
Score: 0/1
14.
A company can borrow from a bank at a margin to the bank's base rate. All of the following affect this margin EXCEPT:
Student Response
Value
A.
B.
C.
D.
100%
Score: 1/1
15.
For what type of lease does the lessee borrow a large part of the funds, typically in a multi-million dollar arrangement,
often with a lease manager, while one or more financial institutions provide the remainder?
Student Response
A.
An equity lease
B.
A leveraged lease
100%
C.
D.
Value
A sale and leveraged lease

A financial lease
Score: 1/1
2010 Sem1 Quiz3
93

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2010 Sem1 Quiz3

Which of the following best describes a fully amortised term loan?

2010 Sem1 Quiz3

7. Which one of the following statements is true?

2010 Sem1 Quiz3

of greater liquidity in the secondary market

11. Bonds are:

2010 Sem1 Quiz3

2010 Sem1 Quiz3

9. Which one of the following statements is true?

2010 Sem1 Quiz3

2010 Sem1 Quiz3

9. Which one of the following statements is true?

2010 Sem1 Quiz3

2010 Sem1 Quiz3

agreements involving factoring of accounts receivable are made on a _______ basis.

2010 Sem1 Quiz3

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7.51% per annum

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buys a commercial bill

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2010 Sem1 Quiz3

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Which maturity date is NOT likely for a bank bill?

2010 Sem1 Quiz3

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to invest medium-term funds

The lender who registers a mortgage as a security for a loan is the:

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A security backed by real estate is a/an:

2010 Sem1 Quiz3

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corporate bond with a credit enhancement

short-term credit fluctuations

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2010 Sem1 Quiz3

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A revolving line of credit

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bond B will have the greater change in price

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

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2010 Sem1 Quiz3

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A major advantage of a bill financing facility is that it:

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