FIN /
320F
/ /
Exam 1 Questions With Correct Answers
/ // // // // //
Financial //Instrument //- //verified //answer(s)-
✔✔A /
/particular /
/type /
/of /
/debt /
/equity /
/that //
a/
/company /
/issues /
/to //the //public //to //raise //money. //Debt, //stocks //(equity //instrument) //and //stock //options.
Debt //- //verified //answer(s)-
✔✔A /
/financial /
/instrument. /
/Borrowed /
/money /
/that /
/must /
/be /
/repaid /
/with /
/interest /
/at //the //maturity //date. //Include //mortgages, //commercial //paper, //bonds, //unsecured //notes.
,Principal //- //verified //answer(s)-
✔✔The /
/amount /
/that /
/must /
/be /
/repaid //by //the //end //of //the //term, //also //called //maturity //valye, //par //value, //and/or //face //value
Interest //Rate //- //verified //answer(s)-
✔✔The /
/borrower's /
/cost /
/of //debt. //A //percentage //based //on //the //principal. //In //bond's //its //called //the //coupon, //in //T-
bills //is //called //the //discount //and //risk-free //rate //rRF
Discount //Securities //- //verified //answer(s)-
✔✔Sell //for //less //than //par //values //when //issued, //no //interest
Maturity //Date //- //verified //answer(s)-✔✔When //the //principal //must //be //repaid
Discount //rate/Risk //free //rate //- //verified //answer(s)-✔✔The //interest //rate //for //a //T-bill
Liquidation //Priority //payments //- //verified //answer(s)-
✔✔Employees //and //customers, //government, //debt //holders, //equity //holders
Debt //Control //Rights //- //verified //answer(s)-
✔✔Have /
/no /
/voting /
/rights, /
/but /
/can /
, /place /
/restrictions /
/on //what //their //funds //will //be //used //for, //or //force //management //into //bankruptcy.
Short //Term //Debt //- //verified //answer(s)-✔✔> //1 //Year. //T-
bills /
/are /
/bid /
/on //discount //securities, //Federal //Fund //loans //between //banks, //money //market //mutual //funds
Long //Term //Debt //- //verified //answer(s)-
✔✔< //1 //Year. //Recieve //periodic //interest //payments. //Term //loans //and //bonds, //including //T-
notes //(1-10) //and //T-bonds //(< //10)
Term //Loans //- //verified //answer(s)-
✔✔Private //long //term //debt, //goes //directly //from //borrower //to //institution. //3-
15 //years. //Advantage //over //public //offerings //with //speed, //flexibility //and //low //issuance //cost.
Bond //- //verified //answer(s)-
✔✔Long /
/term /
/payments /
/of /
/interest /
/and /
/principal. /
/Interest /
/rates //are //determined //by //coupon //rate //and //are //paid //semianually. //Change //as //market //rates
//change, /
/in /
/the //other //direction, //the //value //of //the //bond //approaches //par //value //the //closer //to //maturity
320F
/ /
Exam 1 Questions With Correct Answers
/ // // // // //
Financial //Instrument //- //verified //answer(s)-
✔✔A /
/particular /
/type /
/of /
/debt /
/equity /
/that //
a/
/company /
/issues /
/to //the //public //to //raise //money. //Debt, //stocks //(equity //instrument) //and //stock //options.
Debt //- //verified //answer(s)-
✔✔A /
/financial /
/instrument. /
/Borrowed /
/money /
/that /
/must /
/be /
/repaid /
/with /
/interest /
/at //the //maturity //date. //Include //mortgages, //commercial //paper, //bonds, //unsecured //notes.
,Principal //- //verified //answer(s)-
✔✔The /
/amount /
/that /
/must /
/be /
/repaid //by //the //end //of //the //term, //also //called //maturity //valye, //par //value, //and/or //face //value
Interest //Rate //- //verified //answer(s)-
✔✔The /
/borrower's /
/cost /
/of //debt. //A //percentage //based //on //the //principal. //In //bond's //its //called //the //coupon, //in //T-
bills //is //called //the //discount //and //risk-free //rate //rRF
Discount //Securities //- //verified //answer(s)-
✔✔Sell //for //less //than //par //values //when //issued, //no //interest
Maturity //Date //- //verified //answer(s)-✔✔When //the //principal //must //be //repaid
Discount //rate/Risk //free //rate //- //verified //answer(s)-✔✔The //interest //rate //for //a //T-bill
Liquidation //Priority //payments //- //verified //answer(s)-
✔✔Employees //and //customers, //government, //debt //holders, //equity //holders
Debt //Control //Rights //- //verified //answer(s)-
✔✔Have /
/no /
/voting /
/rights, /
/but /
/can /
, /place /
/restrictions /
/on //what //their //funds //will //be //used //for, //or //force //management //into //bankruptcy.
Short //Term //Debt //- //verified //answer(s)-✔✔> //1 //Year. //T-
bills /
/are /
/bid /
/on //discount //securities, //Federal //Fund //loans //between //banks, //money //market //mutual //funds
Long //Term //Debt //- //verified //answer(s)-
✔✔< //1 //Year. //Recieve //periodic //interest //payments. //Term //loans //and //bonds, //including //T-
notes //(1-10) //and //T-bonds //(< //10)
Term //Loans //- //verified //answer(s)-
✔✔Private //long //term //debt, //goes //directly //from //borrower //to //institution. //3-
15 //years. //Advantage //over //public //offerings //with //speed, //flexibility //and //low //issuance //cost.
Bond //- //verified //answer(s)-
✔✔Long /
/term /
/payments /
/of /
/interest /
/and /
/principal. /
/Interest /
/rates //are //determined //by //coupon //rate //and //are //paid //semianually. //Change //as //market //rates
//change, /
/in /
/the //other //direction, //the //value //of //the //bond //approaches //par //value //the //closer //to //maturity
