A short-term creditor is primarily interested in the [{Blank}] of the borrower. a. liquidity b. profitability c. consistency d. solvency | Homework.Study.com (2024)

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• Long-term creditors are usually most interested in evaluating: a. liquidity b. marketability c. profitability d. solvency
• The times interest earned ratio is a primary measure of: 1. Liquidity. 2. Long-term debt-paying ability. 3. Activity. 4. Profitability.
• The lowest rate of interest charged by a bank for a short-term loan is known as (blank).
• Lever Age pays a(n) 9% interest rate on $9.1 million of outstanding debt with a face value of $9.1 million. The firm EBIT was $2.9 million. a. What is the time's interest earned? (Round your answer to 2 decimal places.) b. If depreciation is $110,000, w
• A type of short-term loan where the borrower sells its accounts receivables to the lender at a discount to face value is called:
• From, the standpoint of the borrower, is long-term or short-term credit riskier? Explain.
• If Interest Revenue for the period is $17,200 and the beginning and ending Interest Receivable balances are $2,920 and $7,500, respectively, cash received for interest is?
• If Interest Revenue for the period is $17,000 and the beginning and ending Interest Receivable balances are $2,820 and $7,400, respectively, cash received for interest is:
• If Interest Revenue for the period is $15,400 and the beginning and ending Interest Receivable balances are $2,020 and $6,600, respectively, then cash received for interest is: a) $15,400 b) $8,800
• Financial ratios for the years ended December 31,20162015 Leverage Debt ratio (%)66.171.7 Long-term debt to total capital (%)54.464.8 Times interest earned (times)0.60.2 Cash interest coverage (times)3.01.2 Fixed charge coverage (times)0.90.
• A common ratio to measure liquidity is the: a. rate of return on stockholders' equity b. debt ratio c. quick (acid-test) ratio d. times-interest-earned ratio
• Typically debt financing can be either short- or long-term, whereas equity financing is almost all long-term, the word "term" meaning: a. the time between a security's issue and its retirement. b. the
• A debt contract is incentive-compatible? A) if the borrower has the incentive to behave in the way the lender expects and desires, doing otherwise jeopardizes the borrower"s net worth in the business. B) if the borrower"s net worth is sufficiently low so
• If Interest Revenue for the period is $15,000 and the beginning and ending Interest Receivable balances are $1,820 and $6,400, respectively, cash received for interest is: A. $10,420 B. $19,500 C. $15,000 D. $8,600
• Interest is: a. time b. a borrower's payment to the owner of an asset for its use c. the same as a savings account d. always a liability e. always an asset
• A 7.05 percent coupon bond with 17 years left to maturity is offered for sale at $1,045.30. What yield to maturity is the bond offering? (Assume interest payments are semiannual.)
• What is the present value of a perpetual income stream of $40,000 when the market rate of interest is 5%?
• Incurring long-term debt with an arrangement whereby lenders receive an option to buy common stock during all or a portion of the time the debt is outstanding is a frequent corporate financing practic
• If the maturity of a debt instrument is less than one year, the debt is called ____. A) short-term B) intermediate-term C) long-term D) prima-term
• You just borrowed $3,000 from your bank and agreed to repay the interest on an annual basis and principal at the end of three years. What type of loan did you obtain? A. Interest-only B. Amortized C. Perpetual D. Pure Discount E. Lump Sum
• Under current GAAP, the rate of interest assigned to non-interest-bearing notes is: a. the prime rate b. the borrower's incremental borrowing rate c. the lender's incremental borrowing rate d. the interest rate for long-term government securities
• To compensate for the uncertainty of future interest rates and the fact that the longer the term of a loan the higher the probability that the borrower will default, the lender typically [{Blank}]. a. charges a higher interest rate on long-term loans b. r
• At any given time, the yield curve is affected by all of the following except: A. inflationary expectations. B. the approximate yield formula. C. short- and long-term supply and demand conditions. D. liquidity preferences.
• Bryant Co. reported short-term borrowings of $2,500,000, long-term borrowings of $6,800,000, repayments of long-term borrowings of $3,500,000, interest payments of $780,000, repurchase of treasury shares of $500,000, cash dividends declared of $1,100,000,
• ____ are short-term loans in which Treasury bills serve as collateral. A) Repurchase agreements B) Negotiable certificates of deposit C) Federal funds D) U.S. government agency securities
• if general obligation debt is refunded to lower the interest rate and the proceeds are irrevocably placed with an escrow agent or trustee to pay off the old debt as it comes due, the government must:
• Regardless of the specific type of long-term debt, which of the following are normally required with debt transactions? A) to repay the debt B) to pay dividends C) to pay interest D) A and C are both correct
• What are the right formula for interest rate on long term debt, par value of common stock, and dividend policy?
• Paymaster Enterprises has arranged to finance its seasonal working-capital needs with a short-term bank loan. The loan will carry a rate of 15% per annum with interest paid in advance (discounted). In
• A Treasury bill with a face value of $100,000 and 120 days until maturity is selling for $98,500. A. What is the T-bill"s bank discount yield? B. What is the T-bill"s money market yield? C. What is the T-bill"s effective annual yield?
• (TCO D) A bond currently sells for $887 even though it has a par of $1,000. It was issued two years ago and had a maturity of 10 years. The coupon rate is 7% and the interest payments are made semiannually. What is its YTM? (Show workings)
• (TCO D) A bond currently sells for $887 even though it has a par of $1,000. It was issued two years ago and had a maturity of 10 years. The coupon rate is 7% and the interest payments are made semiannually. What is its YTM?
• A loan for $14,320 with interest at 4.75% compounded semi-annually is repaid after 7 years. What is the amount of interest paid?
• What is the term for a graphical representation of the relationship between interest rates and the maturities of debt securities? a. Maturity chart b. Term curve c. Inflationary expectations d. Yield curve
• A borrower is personally liable on a real estate mortgage with an outstanding balance of $1.5 million. Borrower's basis in the property is $1 million and the property has a current fair market value of $1.2 million. The property is repossessed by the bank
• The time's interest earned ratio measures a company's ability to: a. maintain profit after paying interest. b. pay interest and debt on the due date. c. make interest payments out of current earnings. d. pay interest and debt from current assets already o
• Paymaster Enterprises has arranged to finance its seasonal working-capital needs with a short-term bank loan. The loan will carry a rate of 12 percent per annum with interest paid in advance (discount
• Short-term non-interest-bearing notes receivable are usually recorded at their: a. present value b. net realizable value c. principal value d. maturity value
• U.S. Treasury bills pay no interest but are sold at a ____. That is, you will pay a lower purchase price than the amount you receive at maturity. A) premium B) collateral C) default D) discount
• Problem 21-4 APV Model with Constant Growth An unlevered firm has a value of $850 million. An otherwise identical but levered firm has $40 million in debt at a 5% interest rate. Its cost of debt i
• When short-term obligations are expected to be refinanced on a long-term basis, they may be classified as long-term if: \\ a. there is an intent to refinance but no ability to refinance.
• Fallen Company commonly issues long-term notes payble to its various lenders. Fallen has had a pretty good credit rating such that its effective borrowing rate is quite low (less than 8% on an annual
• Which of the following should be classified as a long-term asset? A) Interest Receivable B) Accounts Receivable C) Notes Receivable, due in 5 years D) Cash Equivalents
• A bank with insufficient reserves can increase its reserves by: A) lending federal funds. B) calling in loans. C) buying short-term Treasury securities. D) buying municipal bonds.
• Fallen Company commonly issues long-term notes payable to its various lenders. Fallen has had a pretty good credit rating such that its effective borrowing rate is quite low (less than
• A ten-year bond pays 11% interest on a $1,000 face value annually. If it currently sells for $1,195, what is its approximate yield to maturity? A. 9.33% B. 7.94% C. 12.66% D. 8.10%
• A ten year bond pays 11% interest on a $1000 face value annually. If it currently sells for $1195.00 what is it's approximate yield to maturity?
• The rate the Federal Reserve charges member banks for short-term loans is called the: A. margin rate B. federal funds rate C. discount rate D. reserve requirement
• Fallen Company commonly issues long-term notes payable to its various lenders. Fallen has had a pretty good credit rating such that its effective borrowing rate is quite low (less than 8% on an annual basis). Fallen has elected to use the fair value optio
• What is the market price of a $500,000, ten-year, 12% bond issue sold to yield an effective rate of 10% if interest is paid semiannually? A. $562,312 B. $566,635 C. $425,306 D. $442,650
• Over the long run, one would expect interest income on a bond investment to be equal to: a. the difference between the cash invested and the cash returned on the investment. b. the face value of the bond. c. the difference between the face value and matur
• Fallen Company commonly issues long-term notes payable to its various lenders. Fallen has had a pretty good credit rating such that its effective borrowing rate is quite low (less than 8% on an annual
• A $1,000-face-value bond has a current market price of $935, an 8 percent coupon rate, and 10 years remaining until maturity. Interest payments are made semiannually. Before you do any calculations, decide whether the yield to maturity is above or below t
• A company must repay the bank a single payment of $25,000 cash in 2 years before a loan is entered into. The loan is at 8% interest compounded annually. The present value of the loan is: a. $29,000 b. $23,000 c. $21,433 d. $21,000 e. $25,000
• Youve done your homework on interest rates and believe rates for next 7 years are as follows MRP Can he found as 4 per year to maturity The liquidity premium on 7 years bonds is 3 and default risk is
• A coupon bond that pays interest of $40 annually, has a par value of $1,000, matures in 5 years, and is selling today at a $159.71 discount from par value. The actual yield to maturity on this bond is: a. 5% b. 6% c. 7% d. 8%
• What is the total effective interest expense recorded over the term to maturity?
• A Treasury bill with 41 days to maturity is quoted at 99.515. What is the bank discount yield, the bond equivalent yield, and the effective annual return?
• A firm's bonds have a maturity of 14 years with a $1,000 face value, have an 11% semiannual coupon, are callable in 7 years at $1,232, and currently, sell at a price of $1,400.36. What is their nominal yield to call? Do not round intermediate calculations
• What is the yield to maturity (YTM) on a simple loan for $1,000 that requires repayment of $3,000 in five years' time?
• Long-term notes receivable issued for non-cash assets at an unrealistically low interest rate will be: a. discounted at an imputed interest rate. b. recorded at the contract amount. c. recorded at an amount equal to the future cash flows. d. accounted for
• The assumption of a stable interest expense per year is inherent under which of the following amortization methods? a. straight-line method b. effective interest method c. present-value method d. stated-interest method
• What is the difference between a long term debt and the current portion of long term debt?
• The rate of interest actually earned by bondholders is called the: a. stated rate. b. yield rate. c. effective rate. d. effective, yield, or market rate. e. none of these.
• A General Power bond carriers a coupon rate of 9.7%, has 9 years until maturity, and sells at a yield to maturity of 8.7%. (Assume annual interest payments.) a) What interest payments do bondholders receive each year? b) At what price does the bond sell
• The market price of a $500,000, 10-year, 12% (pays interest semiannually) bond issue sold to yield an effective rate of 10% is: a. $561,445 b. $562,311 c. $566,635 d. $936,180
• The market price of a $500,000, ten-year, 12% (pays interest semiannually) bond issue sold to yield an effective rate of 10% is: a. $562,311 b. $566,635 c. $936,180 d. $561,445
• Our long-term debt represents the remaining balance on a 30-year loan taken out in 1991 at 13 percent with options to refinance every 10 years. If we refinance for the remaining 10 years at 7 percent, how much interest expense will we save over the remain
• The yield to maturity for a perpetuity is a useful approximation for the yield to maturity on long-term coupon bonds. It is called the ________ when approximating the yield for a coupon bond. A) current yield B) discount yield C) future yield D) star
• Christopher is a cash-method, calendar-year taxpayer, and he made the following cash payments related to his business this year. 1) $525 of interest on a short-term loan incurred in September and repa
• A bond with a coupon rate of 5.76% with semiannual payments and matures in 23 years. YTM = 6.82%. What is the annual yield?
• Consider the bank information given below. What is the bank's expected economic net interest income? | Assets | Market value | Rate | Duration (years) | Liabilities and Equity | Market Value | Rate | Duration (years) | Cash | $150 | | | Time Deposits |
• If you are a banker and expect interest rates to rise in the future, would you want to make short-term or long-term loans?
• What is the market price of a 200,000, 10 year, 9% bond issue sold to yield an effective interest rate of 7% if interest is paid semiannually? (Do not round any intermediary calculations, and round your final answer to the nearest dollar.) (a) 142,241 (b)
• Investigate the effect of the term on simple interest amortized auto loans by finding the monthly payment and the total interest for a loan of $11,000 at 9 7 8 % interest if the term is the following.
• The current yield curve for default-free zero-coupon bonds is as follows: Maturity (years)YTM 19.1% 210.1% 311.1% a. What are the implied one-year forward rates? (Maturity (years)YTMForward Ra
• An installment loan generally has all of the following features except: a. the cash payment per period by the borrower is the same amount each time. b. the amount of the payment applied to interest decreases over time. c. the amount of the payment appl
• A borrower has two alternatives for a loan: (a) issue a $480,000, 60-day, 8% note or (2) issue a $520,000, 120-day note that the creditor discounts at 12%. (Assume a 360-day year is used for interest
• A Treasury bill with 90-day maturity sells at a bank discount yield of 3%. a. What is the price of the bill? b. What is the 90-day holding period return of the bill? c. What is the bond equivalent yield of the bill? d. What is the effective annual yield o
• The beginning and ending balances of long-term debt are $64,000 and $35,200, respectively, and, cash payments for long-term debt during the year were $34,100. How much new long-term debt was issued during the year? A) New long-term debt issued during the
• The charge for using money over time, often associated with long-term loans, is known as: a) interest. b) principal. c) distribution charge. d) cash dividend. e) preferred dividend.
• Bank reserves include: A) deposits at the Fed and short-term treasury securities. B) vault cash and short-term treasury securities. C) vault cash and deposits at the Fed. D) deposits at other banks and deposits at the Fed.
• The normal balance for interest expense is: a. debit. b. credit.
• You buy a bond for $1,118 that pays $20 interest every 6 months. It will reach maturity in 9 years at which time it will return its face value of $1,000 plus the final $20 interest payment. What is the pre-tax annual rate of return on this bond? Show all
• A $10,000 loan is to be repaid at the rate of $200 per month, with an annual effective interest rate of 19.56% charged against the unpaid balance. What principal remains to be paid after the third payment?
• Because of an expected rise in interest rates in the future, a banker will likely: A) make long-term rather than short-term loans. B) buy short-term rather than long-term bonds. C) buy long-term rather than short-term bonds. D) make either short or lo
• The rate of interest that is printed on a bond is called the _____ rate of interest. A. variable B. stated C. maturity D. market
• If you borrowed $1,000 for a 3-year period, with a simple interest rate of 10% per annum, the total interest to be paid would be: a. $750 b. $500 c. $300 d. $1,000 e. None of the other alternatives are correct.
• A company plans to borrow $5 million for 12 months with a 14% interest rate. Find the effective rate of interest with 3 of the following types of loans. a) Simple 14% interest with a 10% compensating balance. b) Discounted interest. c) Discounted interest
• Bond value and time: Constant required returns Pecos Manufacturing has just issued a 15-year, 12% coupon interest rate, $1,000-par bond that pays interest annually. The required return is currently 14
• PowerTap Utilities is planning to issue bonds with a face value of $2,100,000 and a coupon rate of 9%. The bonds mature in 10 years and pay interest semiannually every June 30 and December 31. All of
• An interest-only loan is an example of a: a. fully-amortizing loan. b. loan with negative amortization. c. non-amortizing loan. d. partially-amortizing loan.
• Interest cost incurred in purchasing an asset that is ready for its intended use should be: a. written off over the remaining term of the debt. b. be accumulated in a separate deferred charge account and written off equally over a 40-year period. c. not b
• What is the Yield to Maturity (YTM) and Yield to Call (YTC) for a bond which is currently priced at 1030 if the bond has a coupon of 6%, matures in 8 years but could be called at a price of 1010 in 4 years? Interest paid annually.
• PowerTap Utilities is planning to issue bonds with a face value of $2,800,000 and a coupon rate of 7 percent. The bonds mature in 15 years and pay interest semiannually every June 30 and December 31.
• PowerTap Utilities is planning to issue bonds with a face value of $2,700,000 and a coupon rate of 8 percent. The bonds mature in 10 years and pay interest semiannually every June 30 and December 31.
• If you borrowed $1,000 for a 2-year period, with a simple interest rate of 5% per annum, the total interest to be paid would be: a. $300 b. None of the other alternatives are correct. c. $500 d. $1,000 e. $100
• Bruner Breakfast Foods (BBF) balance sheet shows a total of $20 million long-term debt with a coupon rate of 8.00% (assume each bond to have a maturity value, M, of $1,000). The yield to maturity on this debt is 10.00%, and the debt has a total current ma
• If a bond is trading at 96.829 with a yield to maturity of 4.53 percent and duration equal to 5.38, its price value of a basis point (PVBP) is closest to: A. 0.0439 B. 0.0521 C. 0.0538
• Debt Securities Face:$ 100,000.00 Face rate7.0% Market rate @ purchase 7.7% purchased 1/1/2xx1 Market rate @ 12/31/2xx1 6.5% Interest payable annually @ 12/31 Price paid based on market rate Term