Assume the time from acceptance to maturity on a $4,000,000 banker's acceptance is 180 days.Further assume that the importing bank's acceptance commission is 1.25 percent and that the market rate for 90-day B/As is 6.0 percent.Calculate the amount the exporter will receive if he holds it to maturity.

Question

Quizplus · Accepted Answer

The exporter will receive the face value of the banker's acceptance minus the acceptance commission. The acceptance commission is 1.25% of $4,000,000, which is $50,000. Therefore, the amount the exporter will receive is $4,000,000 - $50,000 = $3,950,000. However, since the market rate for 90-day B/As is 6.0%, the discount for 180 days needs to be calculated. The discount is $4,000,000 * (6.0%/2) = $120,000. Therefore, the amount the exporter will receive is $4,000,000 - $120,000 = $3,880,000. However, the correct calculation should consider the commission first, so the correct amount is $3,975,000.

Assume the Time from Acceptance to Maturity on a $4,000,000