1.1 What do you understand about commitment fee on an overdraft facility? Why do you think the bank apply such a charge onto its client?

1.2What are the differences between the free trade credit and the costly trade credits?

2.1 The company you are working is in need of some funding. Your manager believes the cheapest source of funding would be the accruals. That is the company should simply just delay all the payments given that they are free Do you agree?

2.2 STR TRK Ltd. is trying to arrange financing for its working capital requirement next year. They could borrow from its bank on (a) simple interest basis for one year at 12%pa simple interest. (b) borrow on a three-month renewable loan at 11.5%pap (c) borrow on a loan at 10.0% compounded weekly. What is the EAR of these facilities assuming 365 day per year?

2.3 A leather cushion maker in Richmond requires a trade facility to pay for its import of $850,000 raw leather from Argentina. The bank has recommended using the bills of exchange to pay for its imports. How much will the company receive if they issue a bill of exchange at $850,000 and the bank charges 3.5%pa return for this 270 day trade facility?