The issuer of bankers' acceptances is paying a promised yield of 5%.What would be the promised yield on securities of the bank guaranteeing this issue?
A)Equivalent or less than 5%
B)Higher than 5%
C)Depends on the bank's liquidity
D)Cannot be determined

Question

Quizplus · Accepted Answer

The promised yield on securities of the bank guaranteeing the issue would be equivalent or less than 5% because the bank's guarantee adds creditworthiness to the bankers' acceptances, making them safer and thus requiring a lower yield to attract investors.

The Issuer of Bankers' Acceptances Is Paying a Promised Yield