Final answer:
Online Travel issued $13 million of commercial paper on April 1 with a maturity date of December 31 and a 9% interest rate. Investors will receive interest payments of $1.3 million per period until maturity, when the principal amount will be repaid.
Step-by-step explanation:
A commercial paper is a type of short-term debt instrument issued by companies to raise funds for their short-term financing needs. In this case, Online Travel issued $13 million of commercial paper on April 1 with a maturity date of December 31 and a 9% interest rate. This means that investors who purchased the commercial paper would receive interest payments of 9% per year until the maturity date, when the principal amount of $13 million would be repaid.
To calculate the interest payments, we multiply the principal amount ($13 million) by the interest rate (9%), and divide by the number of periods in a year. In this case, since the maturity is on December 31, there are 9 periods (April to December). So, the interest payment would be $13 million x 9% / 9 = $1.3 million per period.
At the maturity date on December 31, Online Travel would repay the principal amount of $13 million to the investors.