A bank accepts 90 day bills with a face value of $20 million for a fee of 120 bps.This bill is sold to an investor at a yield of 4% p.a.The bank's acceptance fee is $240 000.

Question

Quizplus · Accepted Answer

The bank's acceptance fee is calculated as 120 basis points (bps) of the $20 million face value, which equals 0.012 * $20,000,000 = $240,000. However, the statement is false because this calculation is already provided in the question, suggesting the question itself is asserting the acceptance fee is $240,000, which is consistent with the calculation. The question seems to be seeking validation of a calculation already made, not presenting a scenario where the calculation's outcome is in doubt.

A Bank Accepts 90 Day Bills with a Face Value