A Company Is Planning to Issue BABs Next Month for Which

question 50

Multiple Choice

A company is planning to issue BABs next month for which their bank charges an acceptance fee of 110 basis points.They hedge their exposure using BAB futures at a price of 94.50.It turns out the 90-day rate at the time of issue is 5.65%.The company's cost of funds is:

• A)5.50%
• B)5.65%
• C)6.60%
• D)6.75%.
• E)None of these.

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Definitions:

Constitution

The fundamental principles and established precedents according to which a state or other organization is governed, often in the form of a written document.

Preemption

The doctrine that allows a higher level of government to override or prevent actions of a lower level of government in certain areas.

French and Indian War

A conflict between 1754 and 1763 in North America, part of a global struggle between France and Britain, which ultimately led to British dominance in the continent.

Colonial Defense

Strategies and actions taken by a colony to protect itself from military threats and secure its interests during the colonial period.