Tutorial7 - Chapter 10 Medium- to long-term debt 1. As a...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 10 Medium- to long-term debt 1. As a loans officer for Mega Bank, you have been asked by a potential borrower to explain the different loan repayment structures that the bank offers. The client particularly wants to be able to match the cash-flow characteristics of the loan and the business. Why is the client concerned about the timing of cash flows? Discuss with the client the different loan repayment structures that Mega Bank offers. 2. The finance manager of a company has arranged a term loan for the company with the following conditions attached. The loan will have a variable rate of interest of LIBOR plus a 75 basis points. The loan interest will be reset every three months for the duration of the loan. Explain the function and operation of the specific loan conditions. How would the finance manager obtain the new interest rate each three months? 3. The proprietor of a small business has obtained a fully drawn advance from the bank, but is concerned at the fees being charged. He seeks your advice. Explain to the proprietor the range of fees typically charged, and why a bank charges these fees. 4. You are the loans manager for a bank and you are currently writing a loan contract for a medium-sized manufacturing company. Within the loan contract you intend to incorporate a number of positive and negative loan covenants. What are loan covenants? Explain why a financial institution would incorporate loan covenants in a loan contract. Finally, explain the nature of positive and negative covenants and give two examples of each. 5. Merchant banks, in so far as they make term loans, frequently include a bill option clause
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 09/19/2011 for the course FINS 3650 taught by Professor Arnold during the Three '11 term at University of New South Wales.

Page1 / 2

Tutorial7 - Chapter 10 Medium- to long-term debt 1. As a...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online