CFA Practice Question

There are 120 practice questions for this study session.

CFA Practice Question

Which of the following statements about various types of negotiated financing is most correct?

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

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.
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