Assume that today, the annualized one-year interest rate is 7 percent. A two-year security has an annualized
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Question:
Assume that today, the annualized one-year interest rate is 7 percent. A two-year security has an annualized interest rate of 11 percent.
One year from now, you are planning to sell the 1-year commercial paper to investors. You also know that the liquidity premium for your company is estimated to be 1 percent, there is a 0.7 percent tax adjustment, and the appropriate default premium is 1.1 percent. Find the yield of your future commercial paper.
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