Majority of external financing by corporations

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Reference no: EM1362564

Eliminate the wrong answer (or write the answer A, B, C, or D, next to the question). (I don't need extra explanation for the answers)

1. Which of the following best describes real capital?
A. Money
B. A place where the president lives
C. Long-term plant and equipment
D. Interest notes

2. __________ refers to those markets dealing with short-term securities that have a life of one year or less?
A. Capital Markets
B. Money Markets
C. Secondary Markets
D. Primary Markets

3. Which method of financing has traditionally made up the majority of external financing by corporations?
A. Common Stock
B. Corporate Bonds
C. Preferred Stock
D. Municipal Securities

Use the following data for Questions 4-5

Your company plans to borrow $5 million for 12 months, and your banker gives you a stated rate of 14 percent interest. You would like to know the effective rate of interest for the following type of loans. (Each of the following parts stands alone.)

4. Simple 14 percent interest with a 10 percent compensating balance
A. 15.56%
B. 16.28%
C. 25.85%
D. 17.28%

5. Discounted interest with a 5 percent compensating balance.
A. 15.56%
B. 16.28%
C. 25.85%
D. 17.28%

Reference no: EM1362564

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