Botany Bay Pies requires short-term finance and has arranged a bill facility using 90-day bills with...

 

Transcribed Image Text:

Botany Bay Pies requires short-term finance and has arranged a bill facility using 90-day bills with National Australia Bank (NAB). The bill has a $500,000 face value and is issued today at the current 90-day bank bill rate of 4.35% p.a. Assume that 32 days later NAB sells the bill to Prudential Investment Fund when the relevant bank-bill rate is 4.85% p.a. Which party is the acceptor? How much does Botany Bay Pies receive today? What price does Prudential Investment Fund pay? What is one factor that Prudential Investment Fund would have considered before buying the bill? What cash flows will occur on the bill's maturity date? What are the components of this cash flow? (a) (b) (c) (d) Botany Bay Pies requires short-term finance and has arranged a bill facility using 90-day bills with National Australia Bank (NAB). The bill has a $500,000 face value and is issued today at the current 90-day bank bill rate of 4.35% p.a. Assume that 32 days later NAB sells the bill to Prudential Investment Fund when the relevant bank-bill rate is 4.85% p.a. Which party is the acceptor? How much does Botany Bay Pies receive today? What price does Prudential Investment Fund pay? What is one factor that Prudential Investment Fund would have considered before buying the bill? What cash flows will occur on the bill's maturity date? What are the components of this cash flow? (a) (b) (c) (d)

Answer rating: 100% (QA)

a The acceptor of the bill is Botany Bay Pies As the issuer of the bill they are responsible for mak... View the full answer