AU Wom Assess hub@icms th 3. On-line C Chegg Google L attempt.php?attempt-71420&
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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 pageExplanation / Answer
a. An acceptor, like Bankwest in this case, stands by to make payment at the end of the 90 day period in case All Events fails to honour its commitment to repay its short term obligations under the commercial bill. So in a way the bank is adding a credit wrap or a guarantee on the All Events commercial bill which makes it more attractive / less risky for prospective investors looking to invest in the commercial bills. The key advantage here is for small and/or relatively lesser known borrowers to be able to access public markets with the aid of a known enitity like a bank standing as an acceptor which provides comfort to the other investors. The banks who will act as acceptor would be typically bankers to the issuer and would be have performed their due diligence prior to acting as an acceptor.
b. Since in case of acceptor, there is going to be a more credit worthy and known entity like a bank standing as kind of guarantor, the relative risk and hence the returns would be less than a comparable bill of exchange in which the default risk squarely ends on the borrower/issuer balance sheet.
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