Question 1

A company is considering issuing debt in a market environment in which there is a larger than normal spread between high- and low-risk investments. Among several factors, what are the concerns regarding investor behavior that the treasurer will MOST need to consider?

Options :

A : Matching maturity

B : Availability of collateral

C : Capital structure

D : Flight to quality

Answer: D

Question 2

The yield curve is inverted. A creditworthy firm considering alternative debt maturities would MOST LIKELY:

Options :

A : enter into a short-term floating rate agreement.

B : obtain long-term fixed interest rate debt.

C : roll-over short-term debt at each maturity.

D : obtain a long-term floating rate agreement.

Answer: B

Question 3

The time from the deposit of a check in a bank account until the funds can be used by the payee is known as:

Options :

A : collection float.

B : mail float.

C : processing float.

D : availability float.

Answer: D

Question 4

All of the following are reasons to use a confirmed irrevocable letter of credit EXCEPT concern about:

Options :

A : the buyer-s ability to pay.

B : the ability to receive cross-border payments.

C : foreign currency exposure.

D : the stability of the buyer-s bank.

Answer: C

Question 5

The “agency problem” refers to:

Options :

A : management’s use of a fiduciary agent for stockholders.

B : a large and active institutional investor base acting on behalf of individual investors.

C : stockholders who allow management to take actions that will benefit management.

D : the internal audit function reporting to the audit committee of the board instead of to management.

Answer: C

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