MenuItem 10 {Chapter 10} Medium-to-longer-term debt：{ 10 }菜单10章中长期债务

MenuItem 10 {Chapter 10} Medium-to-longer-term debt：{ 10 }菜单10章中长期债务 MenuItem 10: {Topic 10} Medium- to longer-term debt Question 1: Long-term debt can be categorised as financing with an initial maturity: A: over 180 days B: between 1 year and 3 years C: between 3 years and 12 years D*: over 1 year. Level: easy Question 2: ________ granted by banks generally have maturities of 3 to 15 years, and are often made to finance capital expenditure such as building construction and the purchase of real estate. A: Debentures B: Mortgage bonds C*: Term loans D: Capital leases Level: easy Question 3: Banks usually charge a(n) _______ to any portion of a term loan that has not been drawn down. A: establishment fee B: service fee C*: commitment fee D: term fee Level: moderate Question 4: A ________ is provided by a financial institution to a business and has a maturity of more than one year. A: debenture B: mortgage bond C*: term loan D: zero-coupon bond. Level: easy Question 5: A company borrows $75 000 from a bank to be amortised over 5 years at 8.5%% per annum. The annual instalment is: A: $12 657.43 B: $16 275.00 C*: $19 032.43 D: none of the above. Level: moderate Question 6: A company borrows $125 000 from a bank at 7.2%% per annum to be amortised over 6 years. The monthly instalment is: A: $1 861.11 B*: $2 143.15 C: $7 274.21 D: $26 386.61 Test bank t/a Financial Institutions, Instruments and Markets 4e by Viney 10-1 Level: moderate Question 7: Which of the following types of bond generally has the lowest interest rate? A*: Treasury bonds B: corporate BAA bonds C: semi-government bonds D: corporate ABB bonds Level: easy Question 8: Which of the following best describes a fully amortised term loan? A: an interest-only loan with principal repayable at maturity B*: periodic repayments including interest and principal reduction C: interest repayments on the loan are fixed for the period of the loan D: a ‘low-start’ loan whose repayments are increased over the term Level: moderate Question 9: All of the following affect interest rates charged on term loans, EXCEPT: A: default risk B: the maturity C: repayment schedule D*: refinancing risk. Level: easy Question 10: 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 D: the loan repayment schedule. Level: moderate Question 11: All of the following financial institutions arrange mortgage finance for companies, EXCEPT: A: commercial banks B: insurance companies C: building societies D*: investment banks. Level: easy Question 12: All of the following are usually examples of restrictive debt covenants, EXCEPT: A: limitations on additional borrowing B: constraints on disposal of non-current assets C: minimum levels of cash flow D*: supplying the creditors with annual, audited financial statements. Test bank t/a Financial Institutions, Instruments and Markets 4e by Viney 10-2 Level: moderate Question 13: All of the following are examples of restrictive debt covenants, EXCEPT: A: specifying a minimum debt service cover B: restrictions on amalgamation with other companies C*: supplying the creditors with annual audited reports D: limiting annual dividend payments to shareholders. Level: moderate Question 14: The purpose of debt covenants that require the firm to rank any subsequent borrowing below the original loan is to: A: limit the amount of fixed-interest payments B: make sure that any cash restraints do not affect current obligations C*: protect the lender in their claim over pledged assets in the event of failure D: protect the shareholders’ claims over assets. Level: moderate Question 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 D: protect the shareholders’ claims over assets. Level: moderate Question 16: Any breach of any specified loan covenant by the borrower generally gives the lender the right to do all of the following, EXCEPT: A: increase the interest rate B: demand immediate repayment of the loan C: alter the term of the agreement such as reducing the maturity date D*: insist the firm hand over the assets of the company. Level: moderate Question 17: Twenty years ago banks: 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 D: repackaged and sold most loans to investors. Level: moderate Question 18: _______ is the security backed by real estate. A: A debenture B: An income bond C*: A mortgage bond D: A fixed charge debenture Test bank t/a Financial Institutions, Instruments and Markets 4e by Viney 10-3 Level: easy Question 19: All of the following are examples of long-term debt instruments, EXCEPT: A: term loans B: debentures C*: promissory notes D: bonds. Level: easy Question 20: A debenture is: A: an unsecured bond that only best-name corporate borrowers can issue B: a legal document stating the restrictive covenants on the loan C*: a secured bond that is secured by a charge over the assets of the issuer D: a corporate bond that has a credit enhancement. Level: easy Question 21: 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 Level: moderate Question 22: ________ has no charge over the issuing company’s unpledged assets. A: A debenture B: A subordinated debenture C: A floating charge debenture D*: An unsecured note Level: easy Question 23: Many securities contain an option that is included as part of a bond or preferred share that allows the holder to convert the security into a predetermined number of shares. This is called: A*: a conversion feature B: a put option C: a repurchase agreement D: a warrant. Level: easy Question 24: Which type of financial claim is not satisfied until those of the creditors holding certain senior debt have been fully satisfied? A: mortgage bonds Test bank t/a Financial Institutions, Instruments and Markets 4e by Viney 10-4 B: unsecured notes C*: subordinated debentures D: deferred interest debentures Level: moderate Question 25: Corporations and governments use the long-term financing called: A: retained earnings B*: bonds C: shares D: preferred stock. Level: easy Question 26: 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. Level: easy Question 27: Which one of the following statements about bonds is correct? A: Most bonds pay interest annually. B: The yield on a bond is generally a fixed rate. C*: Bond prices vary inversely with interest rates. D: Bond coupon rates vary with interest rates. Level: easy Question 28: The _______ value of a bond is also called its par value. Bonds with a current price greater than their par value sell at _______, while bonds with a current price less than their par value sell at _______. A: premium; face; discount B: discount; premium; face C*: face; premium; discount D: premium; a reduction; discount Level: moderate Question 29: The value of a bond is the present value of the: A: dividends and coupon payments B: dividends and maturity value C: maturity value D*: coupon payments and maturity value. Level: easy Question 30: The coupon interest of a bond is calculated based on its _______, and is paid periodically. A: market value Test bank t/a Financial Institutions, Instruments and Markets 4e by Viney 10-5 B: book value C*: face value D: surrender value Level: easy Question 31: 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: increases to 8% B: increases to 9% C*: remains at 7% D: increases to just below 9%. Level: easy Question 32: The market price of previously issued bonds is often different from face value as: A: the coupon rate has altered B: the maturity date has altered C*: the market rate of interest has altered D: previously issued bonds sell at a discount to new bonds. Level: easy Question 33: The price of a bond with fixed coupon has a _______ relationship with the market interest rates. A: constant B: linear C: varying D*: inverse Level: easy Question 34: When the coupon rate of a bond is above the current market interest rates, a bond will sell at: A: discount B: par C*: premium D: face value. Level: moderate Question 35: When the coupon rate of a bond is below the current market interest rates, a bond will sell at: A*: discount B: par C: premium D: face value. Level: moderate Question 36: When the coupon rate of a bond is equal to the current market interest rates, a bond will sell at: A: discount Test bank t/a Financial Institutions, Instruments and Markets 4e by Viney 10-6 B*: par C: premium D: book value. Level: easy Question 37: A company has two bonds outstanding that have the same features, apart from the maturity date. Bond A matures in 5 years, while bond B matures in 10 years. If the market interest rate changes by 5%: A: bond A will have the greater change in price B*: bond B will have the greater change in price C: the price of the bonds will not alter D: the price of the bonds will change by the same amount. Level: moderate Question 38: A company has two bonds outstanding that have 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%: A*: bond A will have the greater change in price B: bond B will have the greater change in price C: the price of the bonds will not alter D: the price of the bonds will change by the same amount. Level: moderate Question 39: 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. Level: moderate Question 40: A $1 000 face value bond with coupon rate of 8% paid annually has five years to maturity. If bonds of similar risk are currently earning 6%, what is the current price of the bond? A: $920.15 B: $1 000 C*: $1 084.25 D: none of the above Level: moderate Question 41: A $1 000 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: $1 000 C: $1 089.72 D: none of the above Level: moderate Test bank t/a Financial Institutions, Instruments and Markets 4e by Viney 10-7 Question 42: All of the following features of a bond are fixed, EXCEPT: A: coupon rate B: face value C*: price D: interest payments. Level: easy Question 43: A $1 000 face value bond with a 7.5% coupon rate, paid semi-annually and maturing in 5 years is currently yielding 6.4% in the market. What is the current price of the bond? A: $1 000 B: $1 045.84 C*: $1 046.44 D: $1 079.45 Level: moderate Question 44: When market interest rates decline after a bond is issued, the: A: face value of the bond decreases B*: market value of the bond increases C: market value of the bond decreases D: bond price is at a discount. Level: moderate Question 45: When market interest rates increase after a bond is issued, the: A: face value of the bond increases B: market value of the bond increases C*: market value of the bond decreases D: bond price is at a premium. Level: moderate Question 46: If a bond’s price is at a premium to face value, then it has: A*: a yield below its coupon rate of interest B: a yield equal to its coupon rate of interest C: a yield above its coupon rate D: a decreased risk premium. Level: moderate Question 47: If a bond’s price is at a discount to face value, then it has: A: a yield below its coupon rate of interest B: a yield equal to its coupon rate of interest C*: a yield above its coupon rate D: a decreased risk premium. Level: moderate Test bank t/a Financial Institutions, Instruments and Markets 4e by Viney 10-8 Question 48: A bond’s price will be _______ when the coupon rate is higher than current market interest rates; _______ when the coupon rate is equal to the current market interest rates; _______ when the coupon rate is less than the current market interest rates. A*: at a premium; equal to the face value; at a discount B: at a premium; at a discount; equal to the face value C: at a discount; at a premium; equal to the face value D: equal to the face value; at a discount; at a premium Level: moderate Question 49: What is the current price of a debenture with $500 000 face value, a coupon rate of 9.5% paid semi-annually, with six years remaining to maturity and market interest rates increased to 14%? A: $320 149.12 B: $401 613.48 C*: $410 644.78 D: $688 638.80 Level: moderate Question 50: Which of the following statements about ‘net’ finance leases is incorrect? A*: 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. Level: moderate Question 51: A(n) _______ lease is a short-term arrangement where the lessee agrees to make periodic payments to the lessor for the right to use the asset. This arrangement usually contains only minor or no penalties for cancellation of the lease. A: financial B*: operating lease C: direct D: leveraged Level: moderate Question 52: The type of lease where the costs of ownership and operation is borne by the lessee, who agrees to make residual payment at the end of the lease period, is: A: a direct lease B*: a financial lease C: an operating lease D: a leveraged lease. Level: moderate Test bank t/a Financial Institutions, Instruments and Markets 4e by Viney 10-9 Question 53: For what lease does the lessee borrow a large part of the funds, typically in a multi-million dollar arrangement, often with a lease manager, while a financial institution(s) provide(s) the remainder? A: an equity lease B*: a leveraged lease C: a sale and leveraged lease D: a financial lease Level: moderate Question 54: A direct lease is best described as: A: an operating lease B*: a sale and leaseback arrangement C: a full-service lease D: a leveraged lease. Level: moderate Question 55: Compared with missing an interest payment on debt, the penalties for missing a financial lease payment are: A: less severe B*: the same C: more severe D: not related. Level: moderate Question 56: All of the following are advantages of leasing from the lessee’s viewpoint, EXCEPT: A: 100% financing B: the company’s capital is not involved C: flexible repayment scheduling D*: ownership of the asset at the end of the term remains with the lessor. Level: moderate Question 57: The advantages of leasing from the lessor’s perspective (compared with offering a straight loan) include all the following, EXCEPT: 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 D*: the lessor may use the funds for other investment opportunities. Level: moderate Question 58: For what type of lease does the lessee provide a significant part of the funds to purchase the asset, often losing the advantage of leveraged leasing, while a financial institution provides the remainder? A: a capital lease B*: an equity lease Test bank t/a Financial Institutions, Instruments and Markets 4e by Viney 10-10 C: a sale and leveraged lease D: a financial lease Level: moderate Question 59: A _______ is an irrevocable commitment by a financial institution on behalf of a client to make a payment to a third party should the client fail to make a payment to that third party. A: line of credit B: revolving line of credit C*: standby letter of credit D: promissory note. Level: moderate Question 60: Consider the following statements: Finance companies form one of the largest lease groups of lease finance providers in Australia. An ‘operating lease’ tends to be a long-term relationship between the lessee and the lessor, unlike a ‘financial lease’, which tends to be a shorter-term relationship, wherein the lessor may lease the same asset to successive lessees in order to earn a return on the assets. One of the attractions of a financial lease from the point of view of the lessor is that at the end of the lease, the ownership of the asset passes to the lessee, and thus the lessor is not faced with ‘residual value’. In a leveraged lease arrangement, the lessors (or equity participants) contribute the bulk of the finance for the acquisition of the asset that is to be leased, and they may borrow a small part of the total required finance from the so-called debt parties. ‘Structured finance’ is a large investment project, such as the construction of a power-generating plant, which is fully guaranteed by the government. How many are true and how many are false? A: 3 are true and 2 are false B*: 2 are true and 3 are false C: 4 are true and 1 is false D: 1 is true and 4 are false Level: moderate Test bank t/a Financial Institutions, Instruments and Markets 4e by Viney 10-11