What is the effective cost of the commercial paper

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Joe Smith, the Treasurer for the ABC Company, has just discovered that in a few weeks his firm will suffer a cash shortage of $10,000,000 for 60 days. A dealer has told him that commercial paper for 60 days now has a cost of 2.8%. The dealer's annual fee is 0.15% and the commitment fee for a back-up line of credit would be 0.25%. What is the effective cost of the commercial paper, i.e., what rate can Joe Smith expect to pay to cover the shortfall?

Your firm is located in the U.S. and a major customer is located in Europe. Due to historical negotiations, your customers pay your firm in euros. Your firm has just recorded a sale to the customer for 50,000,000 euros. The customer has 30 days to pay the invoice. The current spot rate is 1 euro = $1.38. The foreign exchange expert at your firm believes that the foreign exchange rate in 30 days will either be 1 euro = $1.10 or 1 euro = $1.50. Assume that the U.S. dollar depreciates, what is the expected U.S. dollar value of this sale at the future exchange rate?

Reference no: EM131621931

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