[Company name]
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
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
