A conventional revolving credit agreement allows:

To borrow a fixed amount for the entire commitment period

To borrow for a short-period with a right to renew the loan during the commitment period

To possibly include a provision to convert the credit agreement into a term loan contract at maturity

One advantage of a financial lease is that:

It provides a way to indirectly depreciate land

It has a shorter maturity than term loans

It never appears as a liability on the balance sheet

It eliminate the needs to make periodic payments

It provides a way to indirectly depreciate land

A direct lease, a sale and leaseback, and a leveraged lease are all examples of:

'off-balance sheet' methods of financing

Real estate commissions generally range _______ for new homes and ________ for previously occupied homes or resales. It may be possible to negotiate a lower decision with your broker or to find or one who charges a flat fee.

From 5%-6% for new and from 6%-7%

From 4%-6% for new and from 6%-9%

From 4%-6% for new and from 8%-9%

From 4%-6% for new and from 6%-7%

Prequalification provides estimates of required down payment and closing costs of different types of mortgages. It identifies in advance any problems such as:

Bargaining power with the seller of a house

A corporation in which you are a shareholder has just gone bankrupt. Its liabilities are far in excess of its assets. You will be called on to pay:

A proportionate share of bondholder claims based on the number of common shares that you own.

A proportional share of all creditor claims based on the number of common shares that you own.

An amount that could, at most, equal what you originally paid for the shares of common stock in the corporation.

Is the clause in a real estate sales contract that makes the agreement conditional on such factors as the availability of financing, property inspections, or obtaining expert advice

Is the clause in a real estate purchase contract that makes the agreement conditional on such factors as the availability of financing, property inspections, or obtaining expert advice

Is the clause in a automobile sales contract that makes the agreement conditional on such factors as the availability of financing, property inspections, or obtaining expert advice

Is the clause in a prequalification that makes the agreement conditional on such factors as the availability of financing, property inspections, or obtaining expert advice

A federal law requiring mortgage lenders to give potential borrowers a government publication describing the closing process and providing clear, advance disclosure of all closing costs to home buyers is called:

Real Estate settlement procedure Act

Money market mutual funds:

Enable individuals and small businesses to invest indirectly in money-market instruments

Are available only to high net-worth individuals

Are involved in acquiring and placing mortgages

Are also known as finance companies

The purpose of financial markets is to:

Increase the price of common stocks

Which of the following is NOT an example of a financial intermediary?

International Business Machines, Inc. (IBM)

El Dorado Savings and Loan Association

How are funds allocated efficiently in a market economy?

The economic unit that is willing to pay the highest expected return receives the funds

The most powerful economic unit receives the funds

The economic unit that is willing to pay the highest expected return receives the funds

The economic unit that considers itself most in need of funds receives them

Receipt of the funds is rotated so that each economic unit can receive them in turn

If an investment banker has agreed to sell a new issue of securities on a best-efforts basis, the issue:

Results in no assumption of underwriting risk by the investment banker

Most likely involves an unusually large stock offering

Most likely involves bonds instead of common stock

Results in no assumption of underwriting risk by the investment banker

Most likely involves a well-established, large company

In mortgage loans closing costs are made up of all of the following Except:

Loan application and origination fees paid to the borrower

Loan application and origination fees paid to the lender

Loan application and origination fees paid to the borrower

Privately placed common stock that cannot be immediately resold to the general public

A handwritten certificate representing a corporate IOU

A mass mailing offering a security for sale

Securities issued by the United States Postal Service

Privately placed common stock that cannot be immediately resold to the general public

The actual market value of a right will differ from its theoretical value for all of the following reasons Except for:

The size of the firm's marginal tax rate

The amount of transactions costs incurred

The irregular exercise and sale of rights over the subscription period

To say that there is 'asymmetric information' in the issuing of common stock or debt means that:

Management has more accurate information than investors have

Investors have nearly perfect information

The markets have nearly perfect information

Investors have more accurate information than management has

Management has more accurate information than investors have

ABA CTFA Practice Test 7 - Free Online Exam Prep & Questions

Question 1 / 40

A way to analyze whether debt or lease financing would be preferable is to:

Compare the net present values under each alternative, using the cost of capital as the discount rate

Compare the net present values under each alternative, using the after-tax cost of borrowing as the discount rate

Compare the payback periods for each alternative

Compare the effective interest costs involved for each alternative

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