FPL Inc.has planned a 3-month issue of commercial paper with a face value of $15,000,000.The paper is set to sell at 99.5% of face value.What is the 3-month interest rate?

Question

Quizplus · Accepted Answer

To find the interest rate, we need to use the formula:

Interest = (Face Value - Selling Price) / Face Value

Interest = ($15,000,000 - 0.995*$15,000,000) / $15,000,000

Interest = $75,000 / $15,000,000

Interest = 0.005 or 0.5%

Therefore, the 3-month interest rate is 0.5%. The closest answer choice to this is B, which is 0.5025%, so that would be the best choice.

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