Chapter 32 Quiz, Credit Management
1.
The market for short-term investments is called:
A.
Capital market
B.
Stock market
C.
Bond market
D.
Money market
2.
The discount on a 91-Treasury bill is 4.2%. What is the annually compounded rate of return?
A.
4.18%
B.
5.20%
C.
5.43%
D.
4.37%
3.
Negotiable CDs are issued by:
A.
US Government
B.
Federal agencies
C.
Banks
D.
Corporations
4.
A repurchase agreement occurs when:
A.
A company agrees to buy back its commercial paper before maturity
B.
A bank depositor agrees, in advance, to re-invest money in a negotiable certificate of deposit
C.
An investor buys part of a government security dealer's inventory and simultaneously agrees to sell it back
D.
The federal government agrees to buy T-bills
5.
Floating-rate preferred stock offers competitive rates of return with traditional money-market instruments but:
A.
Is not rated by Moody's or Standard & Poor's
B.
Still provides the corporate investor with the tax exclusion on dividend income
C.
Has a fixed rate of dividend income
D.
Offers a highly competitive trading market
6.
Which of the following describes short-term bank loans?
A.
If unsecured, banks often require borrower to "clean up" the loan for 1 month in the year
B.
Often secured by commercial paper
C.
Almost never secured by accounts receivable
D.
Cannot be from an international bank because Federal Reserve System regulations prohibit Eurodollar borrowing
E.
None of the above
7.
The bank offers you a term loan at 8% on condition that you maintain a 10% compensating balance. What is the effective rate of interest?
A.
6.4%
B.
10.0%
C.
18.0%
D.
8.8%
8.
When banks have to make large loans, they form a group of banks for the purpose of making the loan. The group is called a:
A.
Bank holding company
B.
Syndicate
C.
Golden umbrella
D.
Conglomerate
9.
The federal funds rate is:
A.
The rate at which the federal government lends money
B.
The rate at which the federal government borrows money
C.
The rate at which banks lend excess reserves to each other
D.
The rate IRS charges for late payments
10.
Loan sales by commercial banks may take the form of:
A.
Loan assignments
B.
Loan participations
C.
Loan syndications
D.
All of the above
E.
A and B
11.
In a loan arranged through the assignment of accounts receivable the lender:
A.
Accepts the actual receivable to be collected
B.
Has a lien on the receivables and recourse to the borrower
C.
Assumes full risk of default
D.
All of the above
12.
The three basic forms of inventory loans include:
A.
Blanket inventory lien, field warehouse financing, and line of credit
B.
Blanket inventory lien, line of credit, and trust receipt
C.
Blanket inventory lien, field warehouse financing, and trust receipt
D.
Field warehouse financing, line of credit, and trust receipt
13.
The money market is an over-the-counter market.
A.
True
B.
False
14.
The interest on municipal securities is exempt from federal income tax.
A.
True
B.
False
15.
Some firms sell their own commercial paper directly; others do so through dealers.
A.
True
B.
False
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