In addition to a bank loan in Problem 5, you are also interested in evaluating commercial...

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In addition to a bank loan in Problem 5, you are also interested in evaluating commercial paper as a source of funds. A dealer offers the following terms: 30 day maturity, $15,000,000 to 25,000,000 face value priced to sell at a 4% discount. Dealer fee is 0.12% and a commitment fee on a backup line of credit is 0.30%. a) How much commercial paper do you need to issue the net the $100,000,000 you need? b) What is the effective interest rate and how does it compare with the bank loans? c) How would you finance your needs - one of the loans (which one) or commercial paper? In addition to a bank loan in Problem 5, you are also interested in evaluating commercial paper as a source of funds. A dealer offers the following terms: 30 day maturity, $15,000,000 to 25,000,000 face value priced to sell at a 4% discount. Dealer fee is 0.12% and a commitment fee on a backup line of credit is 0.30%. a) How much commercial paper do you need to issue the net the $100,000,000 you need? b) What is the effective interest rate and how does it compare with the bank loans? c) How would you finance your needs - one of the loans (which one) or commercial paper?

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Okay lets break this down stepbystep a To net 100000000 you need to issue more than 100000000 in com... View the full answer