BU 440 BU440 EXAM 7 ANSWERS - ASHWORTH

BU 440 BU440 EXAM 7 ANSWERS - ASHWORTH

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BU440 Managerial Finance II Exam 7 Answers
Question 21

0 / 2.5 points
Commercial paper and bankers’ acceptances are two forms of corporate financing typically undertaken by:
Question options:
a) 
start-up firms.

b) 
mature firms.

c) 
sole proprietorships.

d) 
All of the above

Question 22

2.5 / 2.5 points
Bonds may be issued through either a __________ or a __________.
Question options:
a) 
private auction; federal auction

b) 
state agency; federal agency

c) 
public auction; private placement

d) 
None of the above

Question 23

2.5 / 2.5 points
For your firm's initial public offering of stock, your investment bank has guaranteed a specific amount of funds your firm will receive. This is an example of what type of investment banker compensation?
Question options:
a) 
Due diligence

b) 
Firm commitment

c) 
IPO

d) 
Best-efforts

Question 24

2.5 / 2.5 points
A letter of credit or line of credit is a preapproved borrowing amount that works much like a:
Question options:
a) 
premium loan.

b) 
discount loan.

c) 
syndicated loan.

d) 
credit card.

Question 25

2.5 / 2.5 points
__________ bankruptcy calls for a company to cease business, sell remaining assets, and distribute the proceeds as governed by a bankruptcy court.
Question options:
a) 
Reorganization

b) 
Chapter 11

c) 
Chapter 7

d) 
None of the above

Question 26

2.5 / 2.5 points
The __________ is the formal contract for the bond between the issuing company and the buyer.
Question options:
a) 
debenture

b) 
sinking fund

c) 
indenture

d) 
prospectus

Question 27

2.5 / 2.5 points
On average, SBA-guaranteed loans have an interest rate that is:
Question options:
a) 
the same as current market rates on business loans.

b) 
lower than current market rates on business loans.

c) 
higher than current market rates on business loans.

d) 
the same as mortgage loans.

Question 28

2.5 / 2.5 points
If you go to your bank and it grants you a lump sum loan today that requires monthly payments for a fixed period of time to repay the borrowed money, you have most likely received a:
Question options:
a) 
discount loan.

b) 
line of credit.

c) 
straight loan with a preset payment schedule.

d) 
compensating balance loan.

Question 29

2.5 / 2.5 points
A major issue with venture capitalists and angel investors is the rate at which their funds will be used up. This is called the ________ rate.
Question options:
a) 
consumption or constriction

b) 
burn rate or bleed

c) 
IV

d) 
depreciation 

Question 30

2.5 / 2.5 points
Commercial paper has a maturity of:
Question options:
a) 
less than 270 days.

b) 
nine to eighteen months.

c) 
greater than one year.

d) 
three to five years.

Question 31

2.5 / 2.5 points
A __________ type of loan is similar to a line of credit. However, even though only a portion of the loan is available to the borrower, interest is paid on the entire face value of the loan.
Question options:
a) 
line of credit

b) 
compensating balance

c) 
straight loan with preset payment schedule

d) 
discount

Question 32

2.5 / 2.5 points
With a line of credit, the bank is compensated:
Question options:
a) 
based on the outstanding balance of the loan.

b) 
based on the principal value of the credit line.

c) 
exclusively with a fixed annual payment.

d) 
based on a fixed interest rate tied to the T-Bill rate.

Question 33

2.5 / 2.5 points
By making a __________, the investment bank agrees to buy an entire issue of new securities from a firm followed by resale of the securities to the public.
Question options:
a) 
firm commitment

b) 
best-efforts

c) 
IPO

d) 
due diligence

Question 34

2.5 / 2.5 points
Commercial paper has a minimum denomination of:
Question options:
a) 
$10,000.

b) 
$50,000.

c) 
$100,000.

d) 
$500,000.

Question 35

2.5 / 2.5 points
Syndicated loans are:
Question options:
a) 
loans where multiple banks join together to make a loan to a single company.

b) 
loans made to television stations to purchase re-runs.

c) 
loans where one bank makes several loans to firms in the same industry in an effort to diversify the bank's loan portfolio.

d) 
loans bought by other banks that have unused funds available for loans.

Question 36

2.5 / 2.5 points
__________ bankruptcy allows a company to attempt reorganization under court supervision without claimants taking action.
Question options:
a) 
Chapter 7

b) 
Chapter 11

c) 
Liquidation

d) 
Chapter 13

Question 37

2.5 / 2.5 points
You have agreed to a $50,000 fixed-rate loan from First National Bank today and promise to repay the loan with 36 equal monthly payments at an APR of 6.50%. How large are your monthly payments? Use a financial calculator to determine your answer.
Question options:
a) 
$1,246.77

b) 
$1,458.21

c) 
$1,532.45

d) 
$1,650.71

Question 38

2.5 / 2.5 points
Which of the following statements is FALSE about proprietorships?
Question options:
a) 
They mix the assets of the company with the personal assets of the owner.

b) 
The owner receives some, but not all, of the profits.

c) 
The limitation of capital may constrain growth.

d) 
The owner makes all decisions.

Question 39

2.5 / 2.5 points
Your bank grants you a lump sum loan today equal to the face value of the loan less the interest. Further, you must repay the face value of the loan amount in a single lump sum at the end of one year. These terms most closely resemble which of the following types of bank loan?
Question options:
a) 
Straight loan with a preset payment schedule

b) 
Compensating balance loan

c) 
Line of credit

d) 
Discount loan

Question 40

2.5 / 2.5 points
Typical SBA-guaranteed loans carry an interest rate equal to:
Question options:
a) 
the prime rate.

b) 
current market rates.

c) 
the prime rate plus a 1% default risk premium.

d)



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