The Time from Acceptance to Maturity on a $500,000 Banker's

question 62

Essay

The time from acceptance to maturity on a $500,000 banker's acceptance is 270 days.The importing bank's acceptance commission is 0.75 percent and that the market rate for 270-day B/As is 4 percent.
If the exporter's opportunity cost of capital is 11 percent,should he discount the B/A or hold it to maturity?

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Definitions:

Goldratt And Cox

They are the authors of "The Goal," a book introducing the Theory of Constraints, a methodology for identifying and managing constraints to improve performance.

Straddles Demand

An approach that aims to meet demand efficiently by preparing for both overestimation and underestimation scenarios.

Average Unit Cost Curve

A graphical representation showing how the cost per unit of producing a good changes with variations in the volume of its production.