The effective annualized cost (%) of a banker’s acceptance that has an all-inclusive annual rate of 5.25% for a one-month loan of $2,000,000 is closest to: A. 5.27. B. 5.38. C. 5.54. This appeared on CFAI mock morning session. Is this in the syllabus? I thought it wasn’t and tried solving it the BDY way, and on the basis of general knowledge about yields; ended up wrong. Is it on syllabus or not? If yes, plz explain this question.
This is in the syllabus on evaluating short term funding for a company. I would recommend at this point not worrying about if it is in the syllabus i(f it’s on CFAI’s mock you can assume it is), and focus on why you missed it.
5.38%?
(1+0.0525/12)^12 -1 = 0.0538 = 5.38%
^^ thats what i think too…
is it right answer:?
i guess correct is 5.54
the equation is = interest/ (loan - interest)
interest is 0.0525/12* 2M
loan is 2M/12