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BSBA-FM3 June 1,
2023
FINALS
Capital Markets Topic 5: Pre-Assessment
1. CMIP
Money market instruments are short-term debt securities that are highly liquid and
have a low level of risk. These instruments are typically issued by governments, financial
institutions, and corporations to meet short-term funding needs or as investment vehicles for
individuals and institutions seeking low-risk, short-term investments. Some common
examples of money market instruments include Treasury Bills, Certificates of Deposit,
Commercial Paper, Repurchase Agreements, and Treasury Notes and Bonds.
3. Treasury Bills
Treasury Bills are also known as T-bills. These are short-term debt obligations
issued by governments, typically with maturities of less than one year. They are
considered to be virtually risk-free and are often used as benchmarks for other money
market instruments.
4. A Banker’s Acceptance
5. A Commercial Letter
2. What are the factors that lenders consider when evaluating an individual or business that
is seeking credit?
Credit History: Lenders examine the borrower's credit history, including their past
repayment behavior and credit utilization.
Credit Score: Lenders often use credit scores, such as FICO scores or VantageScores, as a
numeric representation of an individual's creditworthiness.
Income and Employment Stability: Lenders evaluate the borrower's income and
employment stability to assess their ability to repay the debt.
Debt-to-Income Ratio: Lenders analyze the borrower's debt-to-income ratio (DTI), which
compares the borrower's monthly debt obligations to their monthly income.
Collateral and Assets: For certain types of loans, lenders may consider the availability
and value of collateral or assets that can be used as security for the loan.
Purpose of the Loan: Lenders evaluate the purpose for which the borrower seeks credit.
Personal and Business Guarantees: Lenders may request personal or business guarantees,
which hold individuals or business owners personally liable for repayment in case of
default.
Credit investigation companies, also known as credit bureaus, create credit reports
by collecting data from various sources, such as financial institutions, lenders, and public
records. They verify and standardize the data to ensure accuracy and receive regular
updates to keep the information current. Credit scoring models are used to assess
creditworthiness and generate credit scores. The credit reports provide a summary of an
individual's or business's credit history, outstanding debts, payment patterns, credit
utilization, and other relevant information. Privacy and data security measures are
implemented to protect the confidentiality of the information.
Olarte, Elizabeth R. BSBA-FM3 June 1,
2023
FINALS