Investors invested $800,000 in 60 days Commercial paper has 3 % discount yield on an equivalent size and risk 60 days CD has 3% single payment yield.

1] Solve the PO (purchase price of security)

2] Convert the Commercial paper to Bond

3] Calculate CD (commercial paper and CD with equivalent risk and yield)

4] Calculate EAR (Effective annual return) since you know the bond equivalent yield on #2 to determine the market yield.

Answer rating: 100% (QA)

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