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.

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Definitions:

Honesty

The quality of being fair, truthful, and free from deceit in one's actions and communications.

Business

The practice of making one's living by engaging in commerce.

Corporate Intelligence

The gathering and analysis of information on competitors, market conditions, and internal operations to make informed business decisions.

Misuse

Incorrect, improper, or unlawful use of something that can lead to undesirable outcomes or harm.