Answer 2.5% 3.35% 4.67% 7.46% The effective cost of commercial paper is 6%, and

Question

Answer            

          

                            
           2.5%                             
           3.35%                             
           4.67%                             
           7.46%

The effective cost of commercial paper is 6%, and the effective cost of a bank credit line is also 6%. All other considerations aside, the treasurer should: Answer                                         
           finance with the commercial paper                             
           finance with the bank credit line                             
           be indifferent to the commercial paper or the credit line                             
           wait for interest rates to change before making a decision                                        

Explanation / Answer

1) 3.35%

(5-33% = 3.35%)

2) be indifferent to the commercial paper or the credit line

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