Wellsley Manufacturing Company has been approached by a commercial paper dealer offering to sell an issue of

Question:

Wellsley Manufacturing Company has been approached by a commercial paper dealer offering to sell an issue of commercial paper for the firm. The dealer indicates that Wellsley could sell a $5 million issue maturing in 182 days at an interest rate of 8.5 percent per annum (deducted in advance). The fee to the dealer for selling the issue would be $8,000. Determine Wellsley’s annual financing cost of this commercial paper financing.

Dealer
A dealer in the securities market is an individual or firm who stands ready and willing to buy a security for its own account (at its bid price) or sell from its own account (at its ask price). A dealer seeks to profit from the spread between the...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Contemporary Financial Management

ISBN: 9780324289114

10th Edition

Authors: James R Mcguigan, R Charles Moyer, William J Kretlow

Question Posted: