1) An exporter has just received a banker\'s acceptance created by an internatio
ID: 2648051 • Letter: 1
Question
1) An exporter has just received a banker's acceptance created by an international transaction. If the banker's acceptance has a face value of $250,000 and the bank charges a commission of 1% per annum, how much will the exporter receive from the banker if the acceptance is held until maturity six months from today?
A)$250,000
B)$247,500
C)$248,750
D)$1,250
Answer: C
2) An exporter has just received a banker's acceptance created by an international transaction. If the banker's acceptance has a face value of $250,000, current rates on banker's acceptances are 6%, and the bank charges a commission of 1% per annum, how much will the exporter receive if he sells the acceptance in the secondary market six months prior to maturity?
A)$250,000
B)$244,000
C)$242,500
D)$241,250
Answer: D
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Explanation / Answer
Bankers Acceptance (BA)
A BA is a short term credit instrument created by a non financial institution and guaranteed by bank to make payment. This is the money market instrument that traded at discount from face value.
Face Value of BA= $250000
Commission = 1 % per annum
Maturity period= 6 month
Face Value of Acceptance
$250000
Less: Commission for maturity period ($250000*1%*6/12)
$1250
Amount Received by Exporter on maturity
$$248750
(2)BA sold in Secondary market six months prior to maturity
FV of Acceptance
$250000
Less: Commission @1% per annum for the six month
$1250
Less: Discount rate 6% per annum for six month ($250000*6%*6/12)
$7500
Amount received by exporter on sale of BA at present
$241250
Face Value of Acceptance
$250000
Less: Commission for maturity period ($250000*1%*6/12)
$1250
Amount Received by Exporter on maturity
$$248750
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