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A firm has the line of credit with an interest rate of 3% and a commitment fee of 0.25% based on the unused portion of
- A firm has the line of credit with an interest rate of 3% and a commitment fee of 0.25% based on the unused portion of the line. The total funds available on the credit line equal $5,000,000. The firm expects average daily borrowings of $3,500,000.
- Whats the effective cost of this LOC?
- If the bank asks for 10% compensating balance, whats the effective cost of this LOC?
- A firm is looking to raise $5,000,000 from the commercial paper (CP) market. It receives the following quotes:
- Maturity - 60-days
- Discount Rate - 0.50%
- Dealer Fee - 0.125%
- LOC Commitment Fee - 0.15%
What is the effective cost of issuing this CP?
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Analysis for Financial Management
Authors: Robert C. Higgins
12th edition
1259918963, 9781260140729 , 978-1259918964
