money market interest rate will increase for the next six months‚ the team has come out with a few strategies to be undertaken in order to maximise the bank’s profit. The first instrument will be of the cash products‚ including overnight cash‚ 7-day cash and loan‚ and secondly‚ the discount security which consists commercial bills. 1. Overnight & 7-day Cash The bank can offer to take overnight deposits or make overnight loans to big corporations‚ making use of the increasing interest rate for
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August 2007 issue of debt at 6.25% interest rate and the interest expense journal entry for 2007 and 2008 related to this debt are as follows: August 1‚ 2007 Issue of Debt: Cash 549‚000‚000 Senior N/P Discount 1‚000‚000 Senior Notes Payable 550‚000‚000 December 31‚ 2007: Interest Expense 14‚357‚084 Interest Payable 14‚315‚417 (550‚000‚000 x .0313 x 5/6) Discount 41‚667 (50‚000 x 5/6) February 1‚ 2008: Interest Payable 14‚315‚417 Interest Expense 2‚872‚916 Cash 17
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Time: 50 minutes writing time (no reading time) Question 1 (2 Marks ) (i) Vincent invested a sum of $5‚000 in a bank account earning 5½% p.a simple interest on 1 September 2003. On what date will Vincent’s bank account reach an accumulated balance of $5‚039.18? 23 October 2003 (ii) A 90-day note is to mature for $2‚000 plus simple interest at 7% p.a. Calculate the maturity payment (correct to the nearest cent). $2‚034.52 Parts (iii) to (iv) are based on the following information: A 180-day
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1. Assume the current U.S. dollar-British spot rate is 0.6993£/$. If the current nominal one-year interest rate in the U.S. is 5% and the comparable rate in Britain is 6%‚ what is the approximate forward exchange rate for 360 days? A) 1.42£/$ B) 1.43£/$ C) 0.6993£/$ D) 0.7060£/$ E) 0.6927£/$ Answer: D 2: You are given the following exchange rate quotes in Sydney: |USD/AUD |0.5366
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past loan-repayment performance C*: the term structure of interest rates D: the assets available to be pledged as security Feedback: The margin added to the bank’s base rate will reflect the credit risk of the individual borrower. In assessing the risk and hence the margin‚ the bank is likely to consider factors such as the debt to equity ratio of the borrower and its past loan repayment performance. The term structure of interest rates is a market-wide factor and is likely to influence the
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Spring 2012 Finance 3130 1. Sample Exam 1A Questions for Review The form of organization for a business is an important issue‚ as this decision has very significant effect on the income and wealth of the firm ’s owners. a. b. True False 2. There are three primary disadvantages of a regular partnership: (1) unlimited liability‚ (2) limited life of the organization‚ and (3) difficulty of transferring ownership. These combine to make it difficult for partnerships to attract large amounts of
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year‚ and $10‚000 at the end of the prior year. The interest expense on the income statement for the year is $1‚560. This one is kind of tricky – you have to pay interest on loans there is really no way around it. You could either pay off the loan with the money that is in savings – this would save you a ton on interest – or you could try to find another bank with a lower interest rate for this. Because this is a non-profit organization paying interest on a loan is really unrealistic – If I were in control
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Week 2 Sources of Finance 1) Introduction It was explained in week 1 that this week’s lectures will focus primarily on institutions that provide finance. Finance has been defined by Chadwick and Kirkby (1995‚ p 38) in their book Financial Management (first edition‚ publisher Routledge) as a “system of costs and risks”. As we will see throughout the course‚ the notion of risk from an investor’s point of view is related to whether there is the accrual of the financial returns that are anticipated
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Chapter 15: Financial Instruments: Complex Debt and Equity Case 15-1 Zebo Limited 15-2 On-the-Crest Ltd. 15-3 Techno Wizard Ltd. Suggested Time Technical Review TR15-1 Convertible Debt‚ Investor’s Option 10 TR15-2 Convertible Debt‚ Mandatory Conversion 10 TR15-3 Options and Warrants 10 TR15-4 Share-Based Compensation; Equity-Settled 10 TR15-5 Share-Based
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instrument with no ready market is exchanged for property whose fair market value is currently indeterminable. When such a transaction takes place‚ (Points : 5) the present value of the debt instrument must be approximated using an imputed interest rate. it should not be recorded on the books of either party until the fair market value of the property becomes evident. the board of directors of the entity receiving the property should estimate a value for the property that will
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