Cost of commercial paper
Commercial paper is usually sold at a discount. Fan Corporation
has just sold an issue of 82-day commercial paper with a
face value of $0.5million. The firm has received initial
proceeds of $487,649. (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 82 days throughout the year?
b. If a brokerage fee of $4,662 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 82 days throughout theyear?
Cost of commercial paper Commercial paper is usually sold at a discount. Fan Corporation has just sold an issue of 82-
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answerhappygod
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