PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Textbook Question
Chapter 24, Problem 24PS
Bank loans, commercial paper, and medium-term notes* Complete the passage below by selecting the most appropriate terms from the following list:
floating lien, revolving credit, medium-term note, warehouse receipt, unsecured, commitment fee, commercial paper.
Companies with fluctuating needs for cash often arrange a _________ with their bank that allows them to borrow up to a specified amount. In addition to paying interest on any borrowings, the company must pay a _________ on any unused amount.
Secured short-term loans are sometimes covered by a _________, which gives it a general claim on the firm’s assets. Generally, however, the borrower pledges specific assets. For example, a loan may be secured by inventory. In this case, an independent warehouse company provides the bank with a _________, showing that the goods are held on the bank’s behalf and releases those goods only on instructions.
Banks are not the only source of short-term debt. Many large companies issue their own _________ debt directly to investors, often on a regular basis. If the maturity is less than 270 days, the debt does not need to be registered with the SEC and is known as _________. A company may also have a program to sell longer-maturity debt to investors on a continuing basis. This is called a _________ program.
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Students have asked these similar questions
match the correct term for each of the following descriptions.
Descriptions
Terms
Examples of these instruments include trade credit, accruals, short-term bank loans, and commercial paper.
Accruals
A document that provides evidence of the existence of a debt, and specifies the terms of the loan transaction.
Blanket lien
The cost of accounts payable paid before the expiration of the discount period.
Commercial paper
This financial instrument uses a borrowing firm’s entire inventory of low-priced, fast selling, and fungible products to secure a short-term loan, and allows the borrower to sell items from inventory without the lender’s permission.
Commitment fee
A fee charged by a financial institution providing a guaranteed, or revolving, line of credit, on the unused balance of a revolving line of credit.
Discount interest loan
A form of unsecured short-term financing used by large, extremely creditworthy business organizations.
Factoring
A financial…
Bank Muscat advances secured and unsecured loans to their customers. If Bank Muscat is issuing secured loans, identify which one of the following is the reason for bank to issue secured loan?
a.
To increase interest on loans by the banks
b.
To sell the collateral in the event of non-refund of the loan
c.
To have long standing relationship with customer
d.
To reduce the loan amount and time period
Even before you use a new credit card, what information is the institution that issued your card
required by law to disclose?
o The rate of interest and method used to compute finance charges
o The rate of interest and estimated dollar amount of finance charges
o The method used to compute finance charges and estimated dollar amount of finance
charges
The interest rate on cash advances is generally
The most common method that banks and retail credit card issuers use to compute finance
charges is the average daily balance (ADB) method. You expect to actively use your card. Which
variation of the ADB method will be least expensive for you?
O ADB excluding new purchases
O ADB including new purchases
It doesn't matter
Consider the following case:
On June 1, Crystal's credit card has a balance of $5,626.25. According to the terms of the card's
lending agreement, an interest rate of 20% per year is assessed and the monthly finance charges
are calculated using the Average Daily Balance (ADB)…
Chapter 24 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 24 - Bond terms Use Table 24.1 (but not the text) to...Ch. 24 - Bond terms Look at Table 24.1: a. The AMAT bond...Ch. 24 - Bond terms Select the most appropriate term from...Ch. 24 - Prob. 5PSCh. 24 - Bond terms Bond prices can fall either because of...Ch. 24 - Security and seniority a. As a senior bondholder,...Ch. 24 - Prob. 8PSCh. 24 - Prob. 9PSCh. 24 - Security and seniority a. Residential mortgages...Ch. 24 - Sinking funds For each of the following sinking...
Ch. 24 - Call provisions a. Look at Table 24.1. Suppose...Ch. 24 - Covenants Alpha Corp. is prohibited from issuing...Ch. 24 - Prob. 14PSCh. 24 - Private placements Explain the three principal...Ch. 24 - Convertible bonds True or false? a. Convertible...Ch. 24 - Convertible bonds Maple Aircraft has issued a 4%...Ch. 24 - Convertible bonds The Surplus Value Company had 10...Ch. 24 - Prob. 19PSCh. 24 - Convertible bonds Iota Microsystems 10%...Ch. 24 - Convertible bonds Zenco Inc. is financed by 3...Ch. 24 - Prob. 22PSCh. 24 - Prob. 23PSCh. 24 - Bank loans, commercial paper, and medium-term...Ch. 24 - Prob. 25PSCh. 24 - Tax benefits Dorlcote Milling has outstanding a 1...Ch. 24 - Convertible bonds This question illustrates that...Ch. 24 - Prob. 28PS
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- Bank rates on credit card balances are usually similar to the rate charged on business loans. Group of answer choices: True Falsearrow_forwardWhich of the following is a form of financing consist of short term unsecured promissory note issued by firms with a high credit rating? a. Commercial Papers b. Treasury Bills c. Bankers’ Acceptance d. Bills of Exchangearrow_forwardPrepayment of loans may be initiated by a. bank regulators b. bank auditors c. the central bank d. borrowers and lenders If a bank has a return on assets of 1% and a ratio of equity to assets of 5%, its return on equity will be: a. 20% b. none of the above. c. 25% d. 5% The principal distinction between a credit card and a debit card is that a. credit cards may be used to buy goods and services b. debit cards are used in lieu of check overdrafts c. debit cards do not extend beyond the bank balance d. credit cards are made of plastic and have customer information imbedded on a magnetic strip Written loan policies should contain a. information about credit limits b. information about insider borrowing c. all of the above d. information about loan supervisionarrow_forward
- When a company earns interest on a note receivable or on a bank account, the debit and credit are as follows: Group of answer choices Debit Interest revenue, credit Accounts receivable Debit Interest revenue, credit Interest receivable Debit Accounts receivable, credit Interest revenue Debit Interest receivable, credit Interest revenuearrow_forwardOn a 32 day notice deposit account, if you opt to withdraw funds sooner than the 32 day notice period, there is a fee involved. How are these fees reflected in the GL of the bank?arrow_forwardThe facility where banks advance loans to its customer’s up to a certain amount if there is no deposits in the current account.arrow_forward
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