Solved by verified expert :81. Determine the amount the exporter will receive if
he holds the B/A until maturity.
82. Determine the amount the exporter will receive if
he discounts the B/A with the importer’s bank.
83. Determine the bond equivalent yield the importer’s
bank will earn from discounting the B/A with the exporter.
84. If the exporter’s opportunity cost of capital is
11 percent, should he discount the B/A or hold it to maturity?
If his cost of funds > 2.05% compounded semiannually (EAR = 2.06%), he
should discount the B/A.
The exporter pays the acceptance commission regardless of whether he discounts
the B/A or holds it to maturity, hence it is not marginal to a decision to
discount the B/A.
You could also make this determination based on this calculation:
85. Calculate the amount the banker will receive if
the exporter discounts the B/A with the importer’s bank.
The time from acceptance to maturity on a $300,000
banker’s acceptance is 30 days.
The importing bank’s acceptance commission is 3 percent and that the market
rate for 30-day B/As is 4 percent.
86. Determine the amount the exporter will receive if
he holds the B/A until maturity.
87. Determine the amount the exporter will receive if
he discounts the B/A with the importer’s bank.
88. Determine the bond equivalent yield the importer’s
bank will earn from discounting the B/A with the exporter.
89. If the exporter’s opportunity cost of capital is
11 percent, should he discount the B/A or hold it to maturity?
If his cost of funds > 4.07% compounded monthly (EAR = 4.14%), he should
discount the B/A.
The exporter pays the acceptance commission regardless of whether he discounts
the B/A or holds it to maturity, hence it is not marginal to a decision to
discount the B/A.
You could also make this determination based on this calculation:
90. Calculate the amount the banker will receive if
the exporter discounts the B/A with the importer’s bank.
The time from acceptance to maturity on a $30,000,000
banker’s acceptance is 45 days.
The importing bank’s acceptance commission is 1.5 percent and that the market
rate for 45-day B/As is 4½ percent.
