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Suppose an importer uses a bankers acceptance in a trade. The amount of the bankers...

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Finance

Suppose an importer uses a bankers acceptance in a trade. The amount of the bankers acceptance is $1,000,000, with a bankers acceptance (B/A) rate of -0.45%. Alternatively, instead of using a bankers acceptance, the importer could use a prime-rate-based loan for the same amount. Both the loan and the bankers acceptance would have a term of one half of a year.

Complete the last row of the table, filling in the interest cost of the loan and the bankers acceptance.

Loan

Acceptance
Amount $1,000,000 $1,000,000
Term 0.5 Years 0.5 Years
Rate Prime + 1.50% B/A Rate + 1.50%
1.05% + 1.50% = 2.55% -0.45% + 1.50% = 1.05%
Interest Cost

The interest cost is higher for the .

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