Question
From the following short-term financing alternatives, which is most desirable to the borrowing firm: (a) Payment to suppliers on 40 th day, foregoing the discount
- From the following short-term financing alternatives, which is most desirable to the borrowing firm:
(a) Payment to suppliers on 40th day, foregoing the discount of 1.0% for payment on 10th day, or earlier.
(b) A 6-month discounted loan at 4% per annum, requiring a 10% compensating balance.
(c) A $100,000, 30-day commercial paper, selling at $99,700 today and the sale commission paid to the dealer for its placement is 0.5% at the annual rate. The commission to be paid up front.
(d) A 3-month bankers acceptance with the face value of $100,000, selling today for $99,300. The banks stampage fee is 0.6% at the annual rate and sales commission is 0.15% at the annual rate. Both the stampage fee and commission to be paid up front.
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