A Bank Agrees to Accept 90-Day Bills on Behalf of a Company

question 17

Multiple Choice

A bank agrees to accept 90-day bills on behalf of a company for a fee of 120 basis points.If the face value is $5 million and the yield at issue 5.6% p.a.then:

• A)an investor who buys the bills and holds them to maturity will earn 6.8% p.a.
• B)the borrower receives $4 917 546.89
• C)the bank earns fees of $60 000
• D)if yields increase in 30 days' time so will the borrower's cost of funds
• E)More than one of these is correct.

Understand the concepts of first-mover advantage and sequential-move games.

Recognize the role and strategies of tit-for-tat in repeated games.

Analyze the impact of external consultants in negotiation processes.

Understand the strategic implications of centralized versus decentralized purchasing decisions.

---

Definitions:

External Financing

Funds a business obtains from outside sources, such as loans, investments, or grants, to support its operations or growth.

Dividend Payout Ratio

A financial metric that shows the percentage of a company's earnings paid to shareholders as dividends, reflecting the company's dividend policy and financial health.

Maximum Rate of Growth

The highest possible expansion rate that a business can achieve without obtaining additional financing from external sources.

Sustainable Rate Of Growth

The maximum rate at which a company can grow its revenues without needing to obtain additional financing.