13-106 What are the savings to the corporation if it obtains a loan commitment to back its $10 million issue of commercial paper?

Question

Quizplus · Accepted Answer

A loan commitment typically results in lower interest rates since it provides the issuer with a backup source of funding in case the commercial paper cannot be rolled over. The estimated savings on a $10 million issue of commercial paper is typically around 0.25% to 0.5%, which comes out to $25,000 to $50,000. Therefore, the savings to the corporation with a loan commitment would be $2,500, which is option B.

13-106 What Are the Savings to the Corporation If It