...In relation to a commercial bill, the acceptance fee is: A: the discounter’s fee for taking on the risks associated with discounting the bill B: the fee for drawing up the bill C: the fee for taking the liability for paying the holder at maturity D: the drawer’s fee for taking on the risks associated with drawing the bill. C 33. When a party endorses a bank bill, it: A: repays the face value of the bill to the holder at maturity B: creates a liability for payment of the bill C: provides the funds to the seller D: provides the funds to the discounter of the bill. B 34. A company issues a 90-day bill with a face value of $100 000, yielding 7.65% per annum. What amount would the company raise on the issue? A: $84 130.46 B: $92 350.21 C: $98 123.39 D: $98 148.62 D 35. A holder of a 180-day bill with 60 days left to maturity and a face value of $100 000 chooses to sell it into the market. If 60-day bills are currently yielding 6.8% per annum, what price will be obtained? A: $81 728.61 B: $89 945.79 C: $97 813.27 D: $98 894.55 D 36. Promissory notes have a decided advantage over bills in that: A: they are liquid B: an issuer of a promissory note does not incur a contingent liability C: a borrower without a strong name in the markets does not need bank endorsement D: sole liability to repay the face value at maturity belongs to the underwriting bank(s). B 37. A debenture is: A: an unsecured bond that only best-name corporate borrowers can issue ...
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...1. Given its strategy, what kind of risks does Wellfleet Bank face? Wellfleet Bank faces a variety of risk in its daily operations. Risk faced by Wellfleet Bank associated with this case study includes market risk when there are changes in interest rates, exchange rates and other prices. This is especially true for Wellfleet Bank because they are considering a $1 billion loan to Gatwick Gold Corporation (GGC), a South African gold producer. Additionally, operational risk are linked through Wellfleet Bank's daily activities that include auditing, monitoring and support systems. An example of operational risk for Wellfleet Bank would be when the group head of client relationships and the deputy group chief risk officer disagreed over a proposal, then the Chief Credit Officer would take the ultimate decision. Credit risk will be directly and indirectly affected by exchange rates, interest rates and gold prices. Moreover, foreign exchange risk and country or sovereign risk would directly impact Wellfleet Bank's operations because it is an international organisation that has expanded operations to 78 countries (Lange, Saunders, Anderson, Thomson & Cornett 2007, pp. 96). Other risk faced by Wellfleet Bank includes interest rate risk when maturities of its assets and liabilities are mismatched. Off-balance-sheet risk as a result of their contingent assets and liabilities. Technology risk when there are technological investments. Liquidity risk when they are sudden surge in liability...
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...FINS5530 – Summer Session Assignment 1 (Not more than 10 double-spaced pages; 15 marks) Case Analysis – Risk Management at Wellfleet Bank: All That Glitters Is Not Gold Students will receive a Case Note on which to base their case analysis in response to the questions below. You will find it useful, if you do not have exposure to the case method, to review “How to Write a Case-Based Essay” [by William Ellet - provided]. Assignment questions 1. Given its strategy, what kind of risks does Wellfleet Bank face? 2. Given Wellfleet’s new focus of large corporate deals and its need to recruit relationship managers from investment banks, what are the additional risks you anticipate will be introduced to the Bank? 3. Calculate the Expected Loss, Economic Revenue and Economic Profit for the proposal. Clearly explain any assumptions you may make. Briefly comment on how management should interpret and use your results. 4. Analyze the risk management processes at Wellfleet Bank. What suggestions might you make to the CEO about improving the process? 1 Hints on points the examiner will be looking for: You are required to use the concepts and terminology you have learnt from this course and from your own research. Refrain from relying solely on nontechnical, “common sense”, arguments. You can discuss the case with fellow students but if you do so, you have to disclose in the first footnote of your assignment who those students were, together with their student numbers. Use...
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