A Corporation Is Planning to Issue $10 Million Worth of 180-Day

question 57

Multiple Choice

A corporation is planning to issue $10 million worth of 180-day commercial paper.In order to reduce the interest rates by 25 basis points (per year) ,it plans to back this issue with a standby letter of credit or a loan commitment.The standby letter of credit is available for 20 basis points (per year) to be paid up-front.The loan commitment for $10 million is available for an up-front fee of 15 basis points (per year) and a 5 basis points back-end fee.

What are the savings to the corporation if it obtains a loan commitment to back its $10 million issue of commercial paper?

• A)$1,250.
• B)$2,500.
• C)$3,750.
• D)$5,000.

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Definitions:

Low-Density Lipoproteins

Often referred to as "bad" cholesterol, these are lipoproteins that carry cholesterol from the liver to tissues and can contribute to plaque buildup in arteries.

Saturated Fats

Fats that contain only saturated fatty acids, solid at room temperature, and commonly found in animal products.

Heart Attack

A medical emergency condition where blood flow to part of the heart is blocked, causing damage or death to heart muscle.

Dietary Cholesterol

Cholesterol sourced from food, primarily animal products, its consumption influences the level of cholesterol in the bloodstream to varying degrees among individuals.