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QUESTION FOUR: Suppose you have just been appointed the Finance Director of your company and you are considering borrowing options for K5 Million for 1

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QUESTION FOUR: Suppose you have just been appointed the Finance Director of your company and you are considering borrowing options for K5 Million for 1 month in order to raise short-term funds. The following were the options to you: i. Draw down a line of credit at 10.0 % with 6.0% commitment fee on full amount. ii. Banker's Acceptance at 16.0%, an all-inclusive rate and iii. Commercial Paper at 10.0% with a dealer's commission of 4.0% and a back-up line cost of 6.0%. Determine which option would result in the lowest borrowing cost [TOTAL=20 Marks)

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