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.) What effective annual rate will the firm pay for financing with commercial paper, assuming that it is rolled over every year? а. 82 days throughout the 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-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.) What effective annual rate will the firm pay for financing with commercial paper, assuming that it is rolled over every year? а. 82 days throughout the 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?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text: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.)
а.
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?
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