BUS 225 DAYONE LL
17th Edition
ISBN: 9781264116430
Author: BLOCK
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 8, Problem 8DQ
Summary Introduction
To Explain: The advantages and disadvantages of commercial paper in comparison with a bank.
Introduction:
Commercial Paper:
It is a type of promissory note issued for a fixed maturity period by financial institutions or large companies for the purpose of short-term loans.
Bank Borrowings:
When a bank lends money to an individual, which is to be repaid to the bank later, it is known as borrowings from a bank. Interest is charged on such borrowings by the bank for a specific period of time.
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Chapter 8 Solutions
BUS 225 DAYONE LL
Ch. 8 - Under what circumstances would it be advisable to...Ch. 8 - Discuss the relative use of credit between large...Ch. 8 - Prob. 3DQCh. 8 - Prob. 4DQCh. 8 - Prob. 5DQCh. 8 - Prob. 6DQCh. 8 - Prob. 7DQCh. 8 - Prob. 8DQCh. 8 - Prob. 9DQCh. 8 - Prob. 10DQ
Ch. 8 - Prob. 11DQCh. 8 - Prob. 12DQCh. 8 - Compute the cost of not taking the following cash...Ch. 8 - Regis Clothiers can borrow from its bank at 17...Ch. 8 - Simmons Corp. can borrow from its bank at 17...Ch. 8 - Your bank will lend you $4,000 for 45 days at a...Ch. 8 - Prob. 5PCh. 8 - Prob. 6PCh. 8 - Mary Ott is going to borrow $10,400 for 120 days...Ch. 8 - Prob. 8PCh. 8 - Prob. 9PCh. 8 - Prob. 10PCh. 8 - McGriff Dog Food Company normally takes 27 days to...Ch. 8 - Maxim Air Filters Inc. plans to borrow $300,000...Ch. 8 - Digital Access Inc. needs $400,000 in funds for a...Ch. 8 - Carey Company is borrowing $200,000 for one year...Ch. 8 - Randall Corporation plans to borrow $233,000 for...Ch. 8 - Prob. 16PCh. 8 - Your company plans to borrow $13 million for 12...Ch. 8 - If you borrow $5,300 at $400 interest for one...Ch. 8 - Zerox Copying Company plans to borrow $172,000 ....Ch. 8 - Prob. 20PCh. 8 - Mr. Hugh Warner is a very cautious businessman....Ch. 8 - The Reynolds Corporation buys from its suppliers...Ch. 8 - Prob. 23PCh. 8 - Neveready Flashlights Inc. needs $340,000 to take...Ch. 8 - Harper Engine Company needs $631,000 to take a...Ch. 8 - Summit Record Company is negotiating with two...Ch. 8 - Charming Paper Company sells to the 12 accounts...Ch. 8 - The treasurer for Pittsburgh Iron Works wishes to...Ch. 8 - Prob. 2WECh. 8 - Prob. 3WE
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Similar questions
- How does commercial paper differ from a bank loan? Why is the interest rate often less for commercial paper?arrow_forwardHow does the cost of costly trade credit generally compare withthe cost of short-term bank loans?arrow_forward*this is all one question* 25) a. Why is commercial paper an alternative to short-term bank borrowing for a corporation?b. What is the difference between directly placed paper and dealer-placed paper?c. What does the yield spread between commercial paper and Treasury bills of the same maturity reflect?d. Why does commercial paper have a maturity of less than 270 days?e. What is meant by tier-1 and tier-2 commercial paper?arrow_forward
- If the bank decides to cut down on interest expenses by reducing its dependence upon borrowed funds, what policy must the bank follow?arrow_forwardWe think of banks as being interest rate intermediaries. That is, the borrow cheaply, and then lend at higher rates, and the spread between those is their profit. But, besides interest rates, what other sorts of risks do banks face?arrow_forwardThe purpose of the inflation premium is to maintain the purchasing power of money while it is loaned to someone else. TTrueFFalse What kind of problem bad credit risks people pose to financial intermediaries ? AMoral hazard BNone of the above CAdverse Selection DFree-ridingarrow_forward
- When nominal interest rates have hit the zero lower bound, can central banks affect the interest rates? Select one: OA. Yes: since the zero lower bound applies to nominal rates, not real rates, and it is real rates that are relevant for investment decisions. OB. No: once the zero lower bound is hit, central banks can no longer employ interest rates to stimulate economic activity. OC. Yes, but the mechanism by which central banks manipulate the interest rates that matter for spending must deviate from the banks' traditional method. OD. A and C.arrow_forwardH5. The bank have an incentive to value the new securities at a higher price because they will gain more. Is that a good or bad strategy? Explain whyarrow_forwardHow does the cost of commercial paper compare with the cost ofshort-term bank loans? With the cost of Treasury bills?arrow_forward
- The central bank takes action that lowers interest rates dramatically. what is the effect of it to firm value? increase or decrease and why.arrow_forwardDo you think that IFRS 9 may make loans more expensive for borrowers? Implementation of IFRS 9 will influence borrower make less loan? Is there any needs of improvement with the relationship between borrowers and financial companies?arrow_forwardAll else being equal, if a central bank sells government bonds from the market it would: a. decrease the money supply. b. decrease interest rates. c. mean the supply of loanable funds would move to the right. d. most likely decrease savings in the economy.arrow_forward
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