Gale Corporation recently issued 270-day commercial paper with a face value of $100,000 and a simple interest rate of 11 percent per annum. Assuming there are 360 days in a year, what is the commercial paper's annual percentage rate (APR)? (Round your answer to two decimal places.)

Question

Quizplus · Accepted Answer

To calculate the APR, we need to use the following formula:

APR = (2 x simple interest rate x 360) / (face value x (days to maturity + simple interest rate x days to maturity))

APR = (2 x 0.11 x 360) / (100,000 x (270 + 0.11 x 270))

APR = 0.1199 or 11.99% (rounded to two decimal places)

Therefore, the best choice is A.

Gale Corporation Recently Issued 270-Day Commercial Paper with a Face