BFF9140: Bank Lending
DRAFT EXAM SOLUTIONS
Section A: (10 x 1.5 mark = 15 marks)
Question 1:
The amount of current assets required to meet a firm’s long-term minimum needs is
referred to as ____________ working capital
A
permanent
B
temporary
C
net
D
gross
Question 2:
This material is no longer taught in BFF5914
Question 3:
This material is no longer taught in BFF5914
Question 4:
A tenant offers to sign a lease paying a rent of $1,000 per month, in advance (i.e., the
rent will be paid at the beginning of each month), for five years.
At 10% nominal
annual interest compounded monthly, what is the present value of this lease?
A
$45,000
B
$46,587
C
$47,013
D
$47,458
Question 5:
What is the present value of an offer of $14,000 one year from now if the opportunity
cost of capital (discount rate) is 11% per year nominal annual rate compounded
monthly?
A
$10,587.68
B
$11,546.00
C
$12,548.18
D
$13,564.24
Question 6:
Loan repayments are apportioned to a number of components. These are:
A
principal and interest
B
principal, interest, fees and charges
C
principal, interest, fees, charges and lender’s mortgage interest
D
principal, interest, fees, charges, lender’s mortgage interest and building
insurance
Question 7:
How can a firm provide a margin of safety if it cannot borrow on short notice to meet
its needs?
A
Maintain a low level of current assets (especially cash and marketable
securities)