Home / Questions / Bavarian Sausage needs to transfer $250000 from its deposit account into its concentration...
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%
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