A company has decided to issue a 120-day bank-accepted bill to raise additional funding of $250 000 to buy equipment.If the bank has agreed to discount the bill at a yield of 7.65% per annum,what will be the face value of the bill?
A) $230 875
B) $250 000
C) $256 287.67
D) $312 876.71

Question

Quizplus · Accepted Answer

To calculate the face value of the bill, we need to use the following formula:

Face value = Principal + Interest

Where Principal is the amount being borrowed, and Interest is the cost of borrowing. In this case, the Principal is $250,000, and the Interest can be calculated as follows:

Interest = Principal x Rate x Time
Time = 120 days / 365 days = 0.3288 years

Therefore, Interest = $250,000 x 0.0765 x 0.3288 = $6,412.67

Hence, the Face value = $250,000 + $6,412.67 = $256,287.67

Therefore, the best choice is C.

A Company Has Decided to Issue a 120-Day Bank-Accepted Bill