Question: What is the effective annual cost if a firm issues
What is the effective annual cost if a firm issues $10 million of 180-day BAs at a quoted rate of 6.5 percent, and the bank charges it a 0.5 percent stamping fee? Compare the effective annual cost of 180-day commercial paper issued at $10 million face value for a price of $9,758,000, while the firm must maintain a $10 million credit line and pay a standby fee of 0.5 percent.
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