Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. cost of commercial paper commercial paper is usual

Cost of commercial paper Commercial paper is usually sold at a discount. Fan Corporation has...

80.2K

Verified Solution

Question

Finance

image

Cost of commercial paper Commercial paper is usually sold at a discount. Fan Corporation has just sold an issue of 109-day commercial paper with a face value of $1.4 million. The firm has received initial proceeds of $1,358,567. (Note: Assume a 365-day year.) a. What effective annual rate will the firm pay for financing with commercial paper, assuming that it is rolled over every 109 days throughout the year? b. If a brokerage fee of $13,459 was paid from the initial proceeds to an investment banker for selling the issue, what effective annual rate will the firm pay, assuming that the paper is rolled over every 109 days throughout the year? . a. The effective annual rate the firm will pay for financing with commercial paper, assuming that it is rolled over every 109 days throughout the year, is 10.59 %. (Round to two decimal places.) b. The effective annual rate the firm will pay with the brokerage fee, assuming that the paper is rolled over every 109 days throughout the year, is 7.14%. (Round to two decimal places.)

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students