Question: A company trying to determine if a commercial paper program may be a viable option for raising short-term funds. After discussions with the CP dealer

A company trying to determine if a commercial paper program may be a viable option for raising short-term funds. After discussions with the CP dealer and their bank, they have the following information:

Face Value of Issue: $235 Million Discount Rate on Issue: 7.90% Annual Dealer Fee: 0.64% Annual Credit Line Fee: 0.94% Maturity on CP: 45 Days (rollover every 45 days)

Given this information, what is the effective annual rate on this issue?

Group of answer choices

10.71%

9.71%

12.71%

11.71%

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