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Bavarian Sausage needs to transfer $250000 from its deposit account into its concentration account The company could do it with an EDT which would cost $150 or a wire transfer for $17

Bavarian Sausage needs to transfer $250,000 from its deposit account into its concentration account. The company could do it with an EDT which would cost $1.50 or a wire transfer for $17. The wire transfer would result in the funds being deposited in the concentration account 2 days earlier. The firm’s opportunity cost is 10% and we assume a 360 day year.

 

11.What is the benefit for Bavarian Sausage from using the wire transfer?

a.$138.89

b.$69.44

c.$109.57

d.$53.61

 

 

 

12.What is the net benefit for Bavarian Sausage from using the wire transfer?

a.$53.01

b.$137.89

c.$60.95

d.$121.89

 

 

 

13.What is the minimum transfer amount for which the transfer would be beneficial for Bavarian Sausage?

a.$55,800

b.$27,900

c.$13,850

d.$41,950

 

 

 

 

14.Your supplier offers you trade terms of 3/10 net 40. What is the implicit interest that you pay on the trade credit if you do not take the discount?

a.37.63%

b.0%

c.36.50%

d.28.22%

 

 

 

15.You are contemplating purchasing a $1,000,000 181 day T-Bill that is selling at a discount of 4.25%. What is the dollar discount on the T-Bill?

a.$21,368.06

b.$42,500

c.$38,845.26

d.$19,367.51

 

 

 

16.You are contemplating purchasing a $1,000,000 181 day T-Bill that is selling at a discount of 4.25%. What is the purchase price of the T-Bill?

a.$21,368.06

b.$978,631.94

c.$1,000,000

d.$954,621.52

 

 

 

17.You are contemplating purchasing a $1,000,000 181 day T-Bill that is selling at a discount of 4.25%. What is the money market yield of the T-Bill?

a.4.34%

b.4.25%

c.4.40$%

d.4.15%

 

 

 

18.You are contemplating purchasing a $1,000,000 181 day T-Bill that is selling at a discount of 4.25%. What is the bond market yield of the T-Bill?

a.4.25%

b.4.34%

c.4.40%

d.4.15%

 

 

 

19.Smith Enterprise has a one year credit line of $5,000,000 with Second Bank. On average Smith uses half of the credit line. Second Bank charges a .67% commitment fee on the unused portion of the line and the interest rate is set at LIBOR +2%. Assuming that the LIBOR is currently at 4.3%, what is Smith’s effective borrowing rate?

a.6.97%

b.6.30%

c.7.21%

d.5.98%

Feb 13 2020 View more View Less

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