Answer 2.5% 3.35% 4.67% 7.46% The effective cost of commercial paper is 6%, and
ID: 2703089 • Letter: A
Question
Answer
2.5%
3.35%
4.67%
7.46%
The effective cost of commercial paper is 6%, and the effective cost of a bank credit line is also 6%. All other considerations aside, the treasurer should: Answer
finance with the commercial paper
finance with the bank credit line
be indifferent to the commercial paper or the credit line
wait for interest rates to change before making a decision
Explanation / Answer
1) 3.35%
(5-33% = 3.35%)
2) be indifferent to the commercial paper or the credit line