A company offers credit terms of net 40, with an opportunity cost of 12% to a customer. What discount would have to be offered for the customer to be indifferent between paying on Day 40 and paying with the discount on Day 10?

• A.1.6%
• B.2.0%
• C.1.3%
• D.1.0%

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A bank is evaluating the credit risk for a company seeking to optimize costs and originate a high volume of outgoing ACH payments. What is the BEST provision the bank should establish to control its credit exposure?

• A.A standby letter of credit for the company
• B.A limit on the number of items processed per day
• C.An overdraft facility for the company
• D.An intraday credit limit for the company

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A properly designed concentration system will potentially achieve which of the following results?
I. Increased authority to field offices
II. Increased investment income
III. Improved ability to take discounts
IV.
Reduced dependence on third-party concentration vendors

• A.I and II only
• B.II, III, and IV only
• C.IV only
• D.II and III only

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A high-yield, non-investment-grade security is commonly referred to as which of the following?

• A.An industrial revenue bond
• B.A convertible bond
• C.An equity warrant
• D.A junk bond

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XYZ Corporation is presently a short-term borrower and uses a revolving line of credit with an interest rate of 7%. The Treasurer would like to reduce interest expense and increase liquidity without renegotiating the line of credit. Which of the following projects should the Treasurer support in order to achieve this objective as quickly as possible?

• A.Store operations believes that an increase in inventory levels will raise sales as the corporation eventually becomes known for its wide selection.
• B.Accounts receivable is spending capital to improve its collection system. With the faster collections that will result, it anticipates recovering the outflows over a two-year period.
• C.Purchasing is trying to extend terms from net 30 to net 60 with one of their primary vendors. The vendor will agree if XYZ concentrates purchases with them.
• D.One large store is being remodeled. When complete, it should generate sufficient additional sales within one year to cover the capital expenditure and produce a positive return on investment.

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