The time from acceptance to maturity on a $1,000,000 banker's acceptance is 120 days. The importer's bank's acceptance commission is 1.75 percent and the market rate for 120-day B/As is 5.75 percent. What amount will the exporter receive if he holds the B/A until maturity? If he discounts the B/A with the importer's bank? Also determine the bond equivalent yield the importer's bank will earn from discounting the B/A with the exporter. If the exporter's opportunity cost of capital is 11 percent, should he discount the B/A or hold it to maturity? (Do not round intermediate calculations. Round "Maturity value" to 2 decimal places. Round "Bond equivalent yield" as a percent rounded to 2 decimal places.) Amount the exporter will receive at maturity Amount the exporter will receive if discounted Bond equivalent yield Should he discount the B/A or hold it to maturity? Discount the B/A %
The time from acceptance to maturity on a $1,000,000 banker's acceptance is 120 days. The importer's bank's acceptance commission is 1.75 percent and the market rate for 120-day B/As is 5.75 percent. What amount will the exporter receive if he holds the B/A until maturity? If he discounts the B/A with the importer's bank? Also determine the bond equivalent yield the importer's bank will earn from discounting the B/A with the exporter. If the exporter's opportunity cost of capital is 11 percent, should he discount the B/A or hold it to maturity? (Do not round intermediate calculations. Round "Maturity value" to 2 decimal places. Round "Bond equivalent yield" as a percent rounded to 2 decimal places.) Amount the exporter will receive at maturity Amount the exporter will receive if discounted Bond equivalent yield Should he discount the B/A or hold it to maturity? Discount the B/A %
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:The time from acceptance to maturity on a $1,000,000 banker's acceptance is 120 days. The importer's bank's acceptance commission
is 1.75 percent and the market rate for 120-day B/As is 5.75 percent. What amount will the exporter receive if he holds the B/A until
maturity? If he discounts the B/A with the importer's bank? Also determine the bond equivalent yield the importer's bank will earn from
discounting the B/A with the exporter. If the exporter's opportunity cost of capital is 11 percent, should he discount the B/A or hold it to
maturity? (Do not round intermediate calculations. Round "Maturity value" to 2 decimal places. Round "Bond equivalent yield" as a
percent rounded to 2 decimal places.)
Amount the exporter will receive at maturity
Amount the exporter will receive if discounted
Bond equivalent yield
Should he discount the B/A or hold it to maturity?
Discount the B/A
%
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