Final answer:
The firm's cost of borrowing when issuing 30-day commercial paper for $9,900,000 at a par value of $10,000,000 is A.approximately 12.3% annually. However, this answer does not match any of the provided options.
Step-by-step explanation:
The cost of borrowing for a firm planning to issue 30-day commercial paper can be calculated by considering the discount the firm offers and the time period of the loan. The discount is given by the difference between the par value and the amount the paper is issued for, which is $10,000,000 - $9,900,000 = $100,000. To annualize the cost for a 30-day period, we need to scale this amount to a year. The firm's annual cost of borrowing can be calculated using the formula:
Annualized interest rate = (Discount / Issue price) * (365 / Days of the paper)
Thus, the calculation becomes:
Annualized interest rate = ($100,000 / $9,900,000) * (365 / 30) = 0.01010101 * 12.1667 ≈ 0.123 or 12.3%
However, the provided answer options do not include 12.3%. Therefore, there might be a typo or an error in the provided options, or additional information might be required to match the answer with the given options.