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2. A corporate treasurer is looking to invest about $4 million for 60 days. Commercial paper rates...

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Finance

2. A corporate treasurer is looking to invest about $4 millionfor 60 days. Commercial

paper rates are a 3.65% discount and CD rates are 3.66%.

a) (0.4’) What is the CP’s bond equivalent yield?

b) (0.3’) What is the CD’s bond equivalent yield?

c) (0.3’) Which is the better investment?

Answer & Explanation Solved by verified expert
4.4 Ratings (731 Votes)
Solution a CPs bond equivalent yield 37233 Working Notes Commercial paper price Amount invested x 1 discount rate x period360 4000000 x 1 365 x 60360 4000000 x 1 000608333333    See Answer
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Transcribed Image Text

2. A corporate treasurer is looking to invest about $4 millionfor 60 days. Commercialpaper rates are a 3.65% discount and CD rates are 3.66%.a) (0.4’) What is the CP’s bond equivalent yield?b) (0.3’) What is the CD’s bond equivalent yield?c) (0.3’) Which is the better investment?

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