Round the answers two decimal places
Cost of commercial paper
Commercial paper is usually sold at a discount. Fan Corporation has just sold an issue of 118?-day commercial paper with a face value of ?$1.3 million. The firm has received initial proceeds of ?$1,281,814.
(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 118 days throughout the? year?
b. If a brokerage fee of ?$12,550 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 118 days throughout the? year?