Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1. A corporation seeking to buy its securities that already issued would most likely A. conduct an IPO with the assistance of an investment banker.

1.

A corporation seeking to buy its securities that already issued would most likely

A.

conduct an IPO with the assistance of an investment banker.

B.

engage in a secondary market buy of equity.

C.

conduct a private placement to a large number of potential buyers.

D.

place an ad in the Wall Street Journal soliciting retail suppliers of funds.

E.

none of the options.

2.

The most illiquid of the following market securities are

A.

commercial paper.

B.

banker's acceptances.

C. T-bills

D.

Fed funds.

E.

Firms stock.

3. An investor is in the 28 percent federal tax bracket and pays a 11 percent state tax rate and 4 percent in local income taxes. For this investor a municipal bond paying 6 percent interest is equivalent to a corporate bond paying _____ interest.

A.

11.79 percent

B.

10.17 percent

C.

9.08 percent

D.

9.68 percent

E.

8.96 percent

4. A corporate customer obtains a $1.5 million loan from a bank. The customer agrees to pay a 6.25 percent interest rate and agrees to make compensating balances of 7 percent of the loan amount. These will be held in noninterest-bearing transactions deposits at the bank for one year. The bank charges a 1 percent loan origination fee on the amount borrowed. Reserve requirements are 10 percent. What is the expected rate of return to the bank (k) (to the nearest basispoint)?

A.

5.95 percent

B.

7.52 percent

C.

7.99 percent

D.

8.01 percent

E.

7.73 percent

5. An increasingly positive financing gap can indicate ________________ liquidity risk because it may indicate _______________ deposits and/or rising loan commitments.

A. increasing; increasing

B. decreasing; decreasing

C. increasing; decreasing

D. decreasing; increasing

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Entrepreneurial Finance

Authors: Denise Lee

1st Edition

1948426129, 9781948426121

More Books

Students also viewed these Finance questions

Question

evaluate signs to determine their value on communication.

Answered: 1 week ago