Firm pay for financing with commercial? paper

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Reference no: EM131912021

Cost of commercial paper

Commercial paper is usually sold at a discount. Fan Corporation has just sold an issue of 89-day commercial paper with a face value of ?$0.6 million. The firm has received initial proceeds of ?$589,248. (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 89 days throughout the? year?

b. If a brokerage fee of ?$5,634 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 89 days throughout the? year?

Round both answers two decimal places

Reference no: EM131912021

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