What is the annualized percentage all-in cost

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Question: Whatchamacallit Sports (A). Whatchamacallit Sports (Whatchamacallit) is considering bidding to sell $100,000 of ski equipment to Phang Family Enterprises of Seoul, Korea. Payment would be due in six months. Since Whatchamacallit cannot find good credit information on Phang, Whatchamacallit wants to protect its credit risk. It is considering the following financing solution. Phang's bank issues a letter of credit on behalf of Phang and agrees to accept Whatchamacallit's draft for $100,000 due in six months. The acceptance fee would cost Whatchamacallit $500, plus reduce Phang's available credit line by $100,000. The bankers' acceptance note of $100,000 would be sold at a 2% per annum discount in the money market. What is the annualized percentage all-in cost to Whatchamacallit of this bankers' acceptance financing?

Reference no: EM131677458

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