You need to borrow $10 million for 90 days. You have the following alternatives:

a. Issue high-grade commercial paper, with a backup line of credit costing .3% a year.

b. Borrow from First Cookham Bank at an interest rate of .25% over LIBOR.

c. Borrow from the Test Bank at prime.

Given the rates currently prevailing in the market (see, for example, The Wall Street Journal ), which alternative would you choose?

AppendixLO1