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Question
Bravo Corporation recently issued 270-day commercial paper with a face value of $2,000,000 and a simple interest rate of 11 percent. The company paid a transaction fee equal to 0.4 percent of the issue, which was taken out of the issue amount before the company received any funds. Assuming there are 360 days in a year, what is the commercial paper's effective annual rate (rEAR)?
a. 17.51%
b. 11.99%
c. 12.56%
d. 12.63%
e. 12.82%
Answer
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