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FIN3702 Assignment 1 Semester 2 2024 (355803)- DUE 6 September 2024 $2.50
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FIN3702 Assignment 1 Semester 2 2024 (355803)- DUE 6 September 2024

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FIN3702 Assignment 1 Semester 2 2024 (355803) QUESTIONS WITH ANSWERS

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  • August 15, 2024
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  • 2024/2025
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FIN3702
Assignment 1
Semester 2 2024
(355803)- DUE 6
September 2024
QUESTIONS WITH DETAILED ANSWERS

,FIN3702 Assignment 1 Semester 2 2024 (355803)- DUE 6 September 2024



Question 1

Which of the following is appropriate collateral for a loan secured under a fl oating
inventory lien?

1. Cars

2. Paper clips

3. Drill presses

4. File cabinets

QUESTION 2

A fi rm has issued R2 million worth of commercial paper that has a 90-day maturity and
sells for R1 950 000. The approximateannual interest rate on the issue of commercial
paper is … (assume 365 days in a year).

1. 5%

2. 11%

3. 21%

4. 23%

Question 3

Lenders recognize that by having an interest in collateral they can reduce losses if the
borrowing fi rm defaults, …

1. and the presence of collateral reduces the risk of default.

2. but the presence of collateral has no impact on the risk of default.

, 3. therefore, lenders prefer to lend to customers from whom they are able to require
collateral.

4. therefore, lenders will impose a higher interest rate on unsecured short-term
borrowing.

QUESTION 4

A Taijikwan Mining fi rm borrowed R100,000 for one year under a revolving credit
agreement that authorized and guaranteedthe fi rm access to R200,000. The revolving
credit agreement had a stated interest rate of 7.5% and charged the fi rm a
1%commitment fee on the unused portion of the agreement. Based on this information,
the effective annual interest rate on theloan was …

1. 7.5%

2. 8.0%

3. 8.5%

4. 9.0%

QUESTION 5

The major type of loan made by banks to businesses is the … \

1. fi xed-asset-based loan.

2. short-term secured loan.

3. capital improvement loan.

4. short-term self-liquidating loan.

Question 6

Eastwood Grocers’ budgeted monthly sales are R3 000. 40% of its customers pay in the
fi rst month and take the 2% discount.The remaining 60% pay in the month following the

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