A petroleum exploration company takes a short-term bank loan in order to finance the purchase of severaltruck-mounted, vibroseis shakers, which have unexpectedly come onto the market at a good price. Once thepurchase is made, the company will obtain long-term financing. Which of the following best describes the short-termloan the company has taken?OA. an uncommitted line of creditOB. bridge loanOC. promissary noteOD. single, end-of-period payment loanOE. evergreen credit

Brief summary:Initially short term bank loan is taken to finance purchase of several truck-mounted…

Answered: A petroleum exploration company takes a…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Please Make this notes clearer and perfectly written. Here is my notes: At times companies engage in repurchase agreements; are from the perspective of the borrowers. they borrow money to finance themselves short term and the value of the money they borrow whatever that value is they agreed to pay the lenders when they return the money with a higher value even if they borrow low and pay high and that difference is their cost of funding repurchase agreements repurchase agreements are always collateralized with high quality paper government securities it can also be a commodity like precious metals gold or silver repos besides the collateralization. The federal funds that's an important take away that one member of the treasury reserve system lends to another short term loans that one member of the treasury reserve system lends to another The banks have surplus reserves with our central bank some are in deficit the who the ones who are in surplus lend to the ones who are in deficit…
A bank wants to implement a loan pricing model and has to look at several variables to consider. Please select the variable that is incorrectly described. a. A profit margin to provide the bank with an adequate return on capital. b. Risk premium to counter the effect of default risk. c. Cost of funding that include the cost of bonds issued. d. Operating costs that include the cost of interest paid to depositors.
Which of the following are characteristics of consumer closed credit (installment debt)? 1. generally the loan is larger than what is available with revolving credit 2. flexibility in the amount and timing of the debt repayment 3. the loan repayment is often fully amortized 4. the interest rate on a collateralized installment loan is typically lower than the interest rate on unsecured revolving credit 5. if the loan is paid before the grace period, then no interest applies 1 and 2 O 2, 4 and 5 O 1, 3 and 4 O 3 and 4
LLCR (Loan Life Coverage Ratio)tells the banker if there is enough cash from the project to make bridge-financing even when some years are expected to have inadequate cashflows to service the debt. a.The information given above is not sufficient to judge b.Uncertain c.True d.False
COST OF BANK LOAN SSCR has been negotiating a line of credit with two local banks. Metrobank offered the school a line with an interest rate which would float exactly with the prime rate and requires a compensating balance of 20%. Bank of the,Philippine Islands (BPI) offered SSC-R Manila a line with an interest rate which would float 1 % above the prime rate and requires a compensating balance of 10%. I. a. Calculate the effective interest rate of each of the offers, assuming the prime rate is 9 percent. b. With which bank do you recommend the school accept the line of credit?
please answer both subparts
1. Which of the following is not a way in which banks lend short-term unsecured loans? Choices: By sending the amount earned from trust and investment products offered by the bank Through a guaranteed credit line that has a commitment fee for any unused amount for the year Through credits cards lines with a certain credit limit By lending a single date maturity loan to a debtor 2. The following are methods of acquiring funds through long-term financing, except Choices: Issuing bonds with semi-annual coupon payment at a discounted price Selling equity securities at an amount above the par value indicated in the stock certificate Issuing a note that indicates a promise to pay the indicated supplier in a future date Selling equity securities with a characteristic of both debt and equity security 3. Which is false about long-term sources of a firm's capital? Choices: Preferred shares are securities whose intrinsic value is based on prospective earnings All types of…
Examine the Falance sheet for a bank below: Assets Liabilities Reserves 600 000 Demand Deposits 5 230 000 Loans 2 000 000 Capital 1 250 000 Buildings 3 880 000 If the desired reserve ratio changes to 5 percent and the bank were to loan out those excess reserves, what is the otential expa nsion in demand deposits (increase in MS) in the banking system? ***You just need to put the number in your answer, no units or commas*** Answer:
Use the following to answer questions 3-4: Use balance sheet available for an FI (all in market values). Consumer loans $150 m Liabilities $300 m Commercial Loans $250 m Equity $100 m Total Assets $400 m Total Liabilities & Equity $400 m The average duration of the loans is 8 years. The average duration of the liabilities is 2 years. 3. What is the duration gap of the bank's portfolio? A. 10 years B. 6.3 years C. 6.5 years D. 7.98 years E. 8.0 years 4. What is the change in the value of the FI's equity for a 1 percent increase in interest rates from the current rates of 0.07 (1.e., 7 percent)? Assume flat term structure, and parallel shifts in yield curves. Use the duration concept. A. $17.30987 m B. $19.51818 m C. -S 22.59093 m D. -$23.11114 m E. - $24.29906 m
QUESTION 1 The following is true about Islamic finance The financing method should be such as to bestow the risk on the lender and not the borrower Interest is payable as long as the risk is borne by the borrower An example of mubarah is when a bank purchases a property, sells to the owner with payments on an installment basis. An example of Ijara is when a bank purchases the property and rents to the borrower without requiring a final purchase price at the end of the contract QUESTION 2 The following is true about a commercial letter of credit (LC), except A bank that issues an LC is responsible for paying the exporter if the importer is unable to pay. The importer's bank first issues the LC to the exporter A LC is an off-balance sheet liability because of the risk that the importer may not be able to pay the bank when payment is due. Once the LC is stamped "accepted" by the…
Accounts receivable as collateral, cost of borrowing Maximum Bank has analyzed the accounts receivable of Scientific Software, Inc. The bank has chosen eight accounts totaling $200,000 that it will accept as collateral. The bank's terms include a lending rate set at prime + 3.5% and a 1.5% commission charge. The prime rate currently is 9%. a. The bank will adjust the accounts by 10% for returns and allowances. It then will lend up to 90% of the adjusted acceptable collateral. What is the maximum amount that the bank will lend to Scientific Software? b. What is Scientific Software's effective annual rate of interest if it borrows $120,000 for 12 months? For 6 months? For 3 months? (Note: Assume a 365-day year and a prime rate that remains at 9% during the life of the loan.) a. The maximum amount that the bank will lend to Scientific Software is $ (Round to the nearest dollar.)
A local restaurant decides to take out an amortized loan as follows: Amount of loan = $50,000; Interest rate = 8%; Term = 5 years. After two instalments the borrower decides to pay off the loan. What is the payoff amount? a. $32,273 b. $22,331 c. $31,543 d. $31,670 Accrual basis in loan pricing refers to a. the number of days used to calculate interest b. the effective yield c. the method of accounting used to record the loans d. none of the above Which of the following accurately describes the other real estate owned that appears as an asset on the bank’s balance sheet? a. includes premises and equipment b. includes only the land owned by the bank. c. usually represents property obtained through foreclosure on problem loans d. is limited to the equipment owned by the bank Collateral does not reduce the risk of a loan per se, because a. it is not part of the loan agreement b. the risk of a loan is determined by the borrower’s willingness and ability to repay…

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