UGBA 10 - Module 1 questions with complete solutions 2023/2024

UGBA 10 - Module 1Secured Loan (Asset-Backed Loan) - correct answer Loan to finance an asset, backed by the borrower pledging the asset as collateral to the lender Collateral - correct answer Asset pledged for the fulfillment of repaying a loan Loan Principal - correct answer Amount of money that is loaned and must be repaid Interest - correct answer Fee paid to a lender for the use of borrowed funds Annual Percentage Rate (APR) - correct answer One-year rate that is charged for the borrowing, expressed as a percentage of the borrowed principal Working Capital - correct answer Current assets - Current liabilities Unsecured Loan - correct answer Loan for which collateral is not required Compensating Balance - correct answer Portion of loan amount on deposit with the bank, typically required for unsecured loans Business Plan - correct answer Document that tells potential lenders why money is needed, the amount, how the money will be used to improve the company, and when it will be paid back Angel Investors - correct answer Outside investors who provide new capital for firms in return for a share of equity ownership Venture Capital - correct answer Private funds from wealthy individuals seeking investment opportunities in new growth companies Corporate Bond - correct answer Formal pledge obligating the issuer to pay interest periodically and repay the principal at maturity Bond Indenture - correct answer Legal document containing the complete details of a bond issue Maturity Date (Due Date) - correct answer Future date when repayment of a bond is due from the bond issuer (borrower) Face Value (Par Value) - correct answer Amount of money that the bond buyer (lender) lent the issuer and that the lender will receive on repayment Short-term Bonds - correct answer Bonds that mature less than 5 years after they are issued Intermediate-term Bonds - correct answer Bonds that mature between 5 and 10 years after they are issued Long-term Bonds - correct answer Bonds that mature more than 10 years after they are issued Default - correct answer Failure of a borrower to make payment when due to a lender Bondholders' Claim - correct answer Request for court enforcement of a bond's terms of payment Bankruptcy - correct answer Court-granted permission for a company to not pay some or all debts Mortgage-backed securities (MBS) - correct answer Mortgages pooled together to form a debt obligation (bond) that entitles the holder (investor) to cash that flows in from the bundled mortgages Initial Public Offerings (IPOs) - correct answer First sale of a company's stock to the general public