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Based on the following information, answer the questions below.

The time from acceptance to maturity on a $10m Bankers Acceptance (BA) is 120 days. The importers banks acceptance commission is 7% and the market rate for 120 day BA is 12%.

A) What amount will the exporter receive if they hold the BA to maturity? Answer to the nearest cent. If your answer is $9 you must write as 9.00 (1 Mark)

Answer: Answer

B) What amount will the exporter receive if he discounts the BA? Answer to the nearest cent. If your answer is $9 you must write as 9.00 (1 Mark)

Answer: Answer

Note: the data contained in these questions is independent from that above

C) The discounted amount on a BA an exporter receives is $1,900,000, the amount the exporter receives if they hold to maturity is $1,950,000 and the face value is $2m on a 120 day BA.

i) Determine the bond equivalent yield the importers bank will earn from discounting the BA with the exporter. Answer as a decimal to 4 decimal places. (2 Marks)

Answer: Answer

ii) Determine the bond equivalent yield the exporter receives from discounting the BA. Answer as a decimal to 4 decimal places. (2 Marks)

Answer: Answer

D) From the list below, choose the method an importer is most likely to prefer to undertake trade finance. (1 Mark)

Answer: AnswerPayment in advancePayment in arrearsLetter of CreditForfaiting

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