Assume the time from acceptance to maturity on a $10,000,000 banker's acceptance is 90 days.Further assume that the importing bank's acceptance commission is 1 percent and that the market rate for 90-day B/As is 3.0 percent.Calculate the amount the banker will receive if the exporter discounts the B/A with the importer's bank.

Question

Quizplus · Accepted Answer

The amount the banker will receive is calculated by first determining the discount and then subtracting the acceptance commission. The discount on the $10,000,000 for 90 days at a 3.0 percent annual rate is ($10,000,000 * 0.03 * (90/360)) = $75,000. The acceptance commission is 1 percent of $10,000,000, which is $100,000. Therefore, the amount received is the discount minus the acceptance commission: $75,000 - $100,000 = -$25,000. However, the question seems to ask for the amount the banker will receive from the perspective of the exporter discounting the B/A, which involves calculating the net proceeds from discounting the B/A. The correct calculation should consider the cost to the exporter for discounting the B/A, which includes the acceptance commission and the discount interest. The acceptance commission is $100,000, and the discount is $75,000, making the total cost $175,000. Thus, the exporter would receive $10,000,000 - $175,000 = $9,825,000. The provided choices seem to misinterpret the calculation or the question's intent. The correct approach to determine the net amount involves subtracting both the acceptance commission and the discount from the principal, not calculating a net cost as a single figure to be selected from the provided options.

Assume the Time from Acceptance to Maturity on a $10,000,000