A company can issue a 45-day $10 million commercial paper at a rate of 4.50%. It can reduce the rate to 4.35% if it is backed by a standby letter of credit (SBLC). A bank is willing to issue the SBLC for a fee of 10 basis points. The following is true: A The fee for issuing the SBLC is $10,000 B The net savings to the issuer is $1,250 C The amount received by the issuer for the commercial paper without an SBLC is $9,945,625. D The difference in the amount received by the issuer with and without the SBLC is $1,875.
A company can issue a 45-day $10 million commercial paper at a rate of 4.50%. It can reduce the rate to 4.35% if it is backed by a standby letter of credit (SBLC). A bank is willing to issue the SBLC for a fee of 10 basis points. The following is true:
| A |
The fee for issuing the SBLC is $10,000
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| B |
The net savings to the issuer is $1,250
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| C |
The amount received by the issuer for the commercial paper without an SBLC is $9,945,625.
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| D |
The difference in the amount received by the issuer with and without the SBLC is $1,875.
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