Rearden Metal wants to raise $5 million using six-month commercial paper.The net proceeds to Rearden will be $4,865,000.The effect annual rate for this financing is closest to:

Question

Quizplus · Accepted Answer

A)The actual six-month return 11ea7cce_3c38_e485_928c_335e301267a3_TB1626_11 - 1 = .027749 or 2.7749%,expressing this as an EAR gives us (1 + .027749)² - 1 = 0.056268 or 5.6268%

Rearden Metal Wants to Raise $5 Million Using Six-Month Commercial