Questions from Managerial Finance

Q: What is “stretching accounts payable”? What effect does this action

What is “stretching accounts payable”? What effect does this action have on the cost of giving up a discount?

Q: How is the prime rate of interest relevant to the cost of

How is the prime rate of interest relevant to the cost of short-term bank borrowing? What is a floating-rate loan?

Q: How does the effective annual rate differ between a loan requiring interest

How does the effective annual rate differ between a loan requiring interest payments at maturity and another, similar loan requiring interest in advance?

Q: What are the basic terms and characteristics of a single-payment

What are the basic terms and characteristics of a single-payment note? How is the effective annual rate on such a note found?

Q: What is a line of credit? Describe each of the following

What is a line of credit? Describe each of the following features that are often included in these agreements: (a) operating-change restrictions, (b) compensating balance, and (c) annual cleanup.

Q: What is a revolving credit agreement? How does this arrangement differ

What is a revolving credit agreement? How does this arrangement differ from the line-of-credit agreement? What is a commitment fee?

Q: How do firms use commercial paper to raise short-term funds

How do firms use commercial paper to raise short-term funds? Who can issue commercial paper? Who buys commercial paper?

Q: Differentiate between a hybrid security and a derivative security.

Differentiate between a hybrid security and a derivative security.

Q: What is the implied price of a warrant? How is it

What is the implied price of a warrant? How is it estimated? To be effective, how should it be related to the estimated market value of a warrant?

Q: The yields for Treasuries with differing maturities on a recent day were

The yields for Treasuries with differing maturities on a recent day were as shown in the table below. a. Use the information to plot a yield curve for this date. b. If the expectations hypothesis is...