Question: Please answer Assume that Fed Ex is planning to issue $100,000,000 of 270-day commercial paper for an effective yield of 4.75 percent. Trough Credit Enhancement,

Please answer

Assume that Fed Ex is planning to issue $100,000,000 of 270-day commercial paper for an effective yield of 4.75 percent. Trough Credit Enhancement, FedEx expects to save 30 basis on the interest rate by using either a Standby Letter of Credit (SLC) or a loan commitment (LC) as collateral enhancement for the issue. What are the net savings to the corporation if a bank agrees to provide a 270-day SLC for an up-front of 19 basis points on the total value to back the commercial paper issue? What are the net savings to the corporation if a bank agrees to provide a 270-day loan commitment to back the commercial paper issue? The bank will charge 10 basis points for an up-front fee and 8 basis points for a back-end fee for any unused portion of the loan. Assume the loan is not needed. Which, if any of the credit enhancement methods should FedEx use

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