[Date]
FIN3702 Assignment 1
Semester 2 2024
(355803)- DUE 6
September 2024
QUESTIONS WITH 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
FIN3702 Assignment 1
Semester 2 2024
(355803)- DUE 6
September 2024
QUESTIONS WITH 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
