Cost of commercial paper Commercial paper is usually sold at a discount. Fan Corporation has...
80.2K
Verified Solution
Link Copied!
Question
Finance
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!
