Commercial paper is usually sold at a discount Fan Corporation has just sold an issue of 90 day commercial paper with a face value of $1 million The firm has received initial proceeds of $978,000 a What effective annual rate will the firm pay for financing with commercial paper, assuming that it is...

a Effective annual rate 1 00225 36590 1 944 b Ef ...

Commercial paper is usually sold at a discount. Fan Corporation has just sold an issue of 90-day

Question:

Commercial paper is usually sold at a discount. Fan has just sold an issue of 90-day commercial paper with a of $1 million. The firm has received initial proceeds of $978,000.
a. What effective annual rate will the firm pay for financing with commercial paper, assuming that it is rolled over every 90 days throughout the year?
b. If a brokerage fee of $9,612 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 90 days throughout the year?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...