The True Cost of Borrowing Under a Commercial Bill

Harry G. Stanton and John A. Rickard
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Harry G. Stanton: Graduate School of Business Administration, University of Melbourne.
John A. Rickard: School of Social and Industrial Administration, Griffith University.

Australian Journal of Management, 1983, vol. 8, issue 2, 95-103

Abstract: In this paper we examine the cost structure of loans obtained by means of a commercial bill and develop a method for calculating the true cost of borrowing. This true cost is expressed as a nominal rate of interest per annum which duly takes into account all relevant borrowing costs, that is, all those costs which are the direct consequence of having taken out the loan. The analysis deals with the common case of renewing the loan (‘rolling over the bill’) for a second period, and the general case where (n–1) renewals are effected is also described.

Keywords: INTEREST COSTS; BORROWING COSTS; COMMERCIAL BILLS (search for similar items in EconPapers)
Date: 1983
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:8:y:1983:i:2:p:95-103

DOI: 10.1177/031289628300800206

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