Savvy Fare has a bankers acceptance drawn on Credit Lyonnais with a face value of $1 million
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Savvy Fare has a banker’s acceptance drawn on Credit Lyonnais with a face value of $1 million due in six months. Credit Lyonnais receives an acceptance fee of $2,000 at maturity. A U.S. bank is willing to buy the acceptance at a discount rate of 5 percent compounded quarterly.
a. How much will Savvy Fare receive if it sells the banker’s acceptance?
b. What is the all-in cost of the acceptance, including the acceptance fee?
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