Screwed Multi Chouce Question (1 Viewer)

[gnrlies]

Ok, i have been thinking about this question i had in a test a while ago, and its screwed becuase there are no answers that are correct. Here is the question:

What is the advantage of a bank bill to the borrower?

a) That it can be sold on secondary markets
b) it is the cheapest form of long term finance
c) It is secured to the borrowers assets
d) -- (cant remeber the other one)

Now, it is apparantly a) but then i dont see how it can, becuase this is not an advantage to the borrower, this is an advantage to the lender.

Am i correct? I want to make sure before i go arguing my point to the teacher.

 

[Roors]

Tell u the truth....im not sure which answer is completely correct, but "a" does seem to be the most correct, although its a bit shaky as well. but a bank bill is issued to a business. The bank acts as an intermediary, this is the process of distributing on a secondary market, i think its an advantage to the lender, and the borrower, (eg, given to bank at a discounted amount, shorter terms...dnt no wat im ravin bout)
I'm not even sure, but out of those answers A does seem to be the only correct one.
If you ask me, its a tricky question!!!!!!!!!

 

[AGB]

maybe the answer id D........

 

[gnrlies]

Well in asked my teacher, and he said that it was meant to be a) but his reasoning was false (as far as im aware.. this is what i need to get clarification on). Seeing as though he wrote the paper, i think he has made an honest mistake....

His explanation to me was that it wasn't the lender who traded the 'IOU' on, but rather it was the borrower who traded the debt on. This is wrong as far as i know.

As for it being a reason, i can see it as being the most correct in terms of it means that it can be cheaper, but i dont think that they can claim it becuase it is not directly due to the fact that it can be traded on the secondary market, it is more that it is not the bank who is lending out the money, but it is actually other intermediaries who are prepared to take lower interest payments.

But yeah...

I will have to wait and see if they include it or not, since we have not got the final test back...