Assume the time from acceptance to maturity on a $10,000,000 banker’s acceptance is 90 days. Further assume that the importing bank’s acceptance commission is 1 percent and that the market rate for 90-day B/As is 3.0 percent. The bond equivalent yield that the bank earns in holding the B/A to maturity is:

A. 0.102 percent
B. 0.2287 percent
C. 0.406 percent
D. none of the options

ANSWER

C. 0.406 percent