Exam (elaborations)
FIN3702 Assignment 1 Semester 2 2024 (355803)- DUE 6 September 2024
- Institution
- University Of South Africa
FIN3702 Assignment 1 Semester 2 2024 (355803)- DUE 6 September 2024 QUESTIONS WITH ANSWERS
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FIN3702 Assignment1 Semester 2 2024
(355803)- DUE 6
September 2024
QUESTIONS WITH COMPLETE ANSWERS
[School]
[Course title]
,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.
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