Freeman Corp., a large corporation, plans to issue 45-day commercial paper with a par value of $3,000,000. Freeman expects to sell the commercial paper for $2,947,000. Freeman's annualized costof borrowing is estimated to be ____ percent.

Question

Quizplus · Accepted Answer

The annualized cost of borrowing can be calculated using the formula: [(Par Value - Sale Price) / Sale Price] * (360 / Days to Maturity) * 100. Substituting the given values: [($3,000,000 - $2,947,000) / $2,947,000] * (360 / 45) * 100 = 14.39%.