AU Wom Assess hub@icms th 3. On-line C Chegg Google L attempt.php?attempt-71420&

Question

AU Wom Assess hub@icms th 3. On-line C Chegg Google L attempt.php?attempt-71420&page; 8 EGUIDE STUDENT DECLARATION FORM LIBRARY Q? 01 Business Finance courses / FIN201 / Assessments / 3.On-linequiz. elements review (1096) All Events P/A. requires short term financing of approximately $350,000. All Events has asked BankWest to act as the acceptor of the commercial bill with the bill to be repaid in 90 days. a) Outline the role and the possible benefits of the an acceptor in the issue of a commercial bilit? b) How does the return on on investment on a bank accepted commercial bill compare to that of a negotiable certificate of deposit? ut of Next p Previous page

Explanation / Answer

Commercial bill are the one which arises from genuine business transaction. These short-term bills are accepted by financial intermediaries like banks. Once these bills are accepted by the banks the bills earn a good reputation and they can than be discounted anywhere as banks take the gaurantee to make payment of bill in case of default. They play an important role especially when the supplier and purchaser are not aware of each other. Banks earn commission or charges commission on this bill which are accepted by them as a token for risk taken by banks.

The return on investment of bank accepted commercial bills are higher than the negotiable certificate of deposit. Also the former is very liquid and the latter is less liquid that is the money would be received by the investor only at the end of the amturity period.

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