- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 4. Fixed-Income Markets for Corporate Issuers
- Subject 1. Short-Term Funding Alternatives
CFA Practice Question
Which of the following statements about various types of negotiated financing is most correct?
B. Banker's acceptances involve a large, well-known bank replacing the creditworthiness of the "drawee" (e.g., an American importer).
C. The principal disadvantage of commercial paper as a source of short-term financing is that it is generally more expensive than a short-term business loan from a commercial bank.
D. Revolving credit agreements are informal arrangements to extend credit up to a maximum amount over a stated time period.
A. Because commercial paper is a money market instrument, even companies ranked low on creditworthiness are able to use it as a source of short-term financing.
B. Banker's acceptances involve a large, well-known bank replacing the creditworthiness of the "drawee" (e.g., an American importer).
C. The principal disadvantage of commercial paper as a source of short-term financing is that it is generally more expensive than a short-term business loan from a commercial bank.
D. Revolving credit agreements are informal arrangements to extend credit up to a maximum amount over a stated time period.
Correct Answer: B
C. The principal advantage of commercial paper as a source of short-term financing is that it is generally cheaper than a short-term business loan from a commercial bank.
D. Revolving credit agreements are formal, legal commitments to extend credit up to some maximum amount over a stated period of time.
A. Because these notes are a money market instrument, only the most creditworthy companies are able to use commercial paper as a source of short-term financing.
C. The principal advantage of commercial paper as a source of short-term financing is that it is generally cheaper than a short-term business loan from a commercial bank.
D. Revolving credit agreements are formal, legal commitments to extend credit up to some maximum amount over a stated period of time.
User Contributed Comments 5
| User | Comment |
|---|---|
| Tommytang | too..much..material to cover for the CFA exam |
| michlam14 | A...greed... |
| johntan1979 | :'( Remembering is one thing, applying it correctly is another, what about insufficient time? |
| kseeba17 | Just cut through the BS, subject 5 is almost entirely just waffle. |
| MathLoser | Please stop telling that it's too much for you. If you can't answer this question, that means you didn't understand how these money market securities work. I beg you, please Google these money market securities. It's very important. |