Question

Commercial paper. ​ Criss-Cross Manufacturers will issue commercial paper for a​ short-term cash inflow. ​ Criss-Cross must raise ​$​, and the paper will have a maturity of days. If this paper has a maturity value of ​$ and is selling at an annual interest rate of ​, what are the proceeds from each​ paper; that​ is, what is the discount rate on the commercial​ paper? What is the discount rate on the commercial​ paper? nothing​% ​(Round to two decimal​ places.)

Answer 1

Proceeds from Commercial paper $48,035.92

Discount rate on commercial paper 3.93%

Step-by-step explanation:

Calculation to determine the proceeds from each​paper

First step is to calculate 182 days rate

182 days rate = 0.082 * 182/365

182 days rate= 0.040887671

Now let calculate the Proceeds from Commercial paper using this formula

Proceeds from Commercial paper = Par value * 1/(1+i for time of issue)

Let plug in the formula

Proceeds from Commercial paper =$50,000 *1/(1+0.040887671)

Proceeds from Commercial paper=$48,035.92

Therefore The proceeds from commercial paper is $48,035.92

Calculation to determine the discount rate on the commercial​paper

First step is to calculate the Discount

Discount = $50,000-$48035.92

Discount=$1,964.02

Now let calculate the Discount rate on commercial paper

Discount rate on commercial paper =$1964.02./50000

Discount rate on commercial paper = 0.039282*100

Discount rate on commercial paper= 3.93%

Therefore the Discount rate on commercial paper is 3.93%