
Explanation:
The correct answer is B (6.4%). The discount rate (DR) for a money market instrument is calculated as follows:
Substituting the given values:
A commercial paper has the following characteristics: redemption value of $5,000,000, interest earned of $140,500, and 160 days to maturity. Assuming a 365-day year, the discount rate is closest to:
A
6.2%.
B
6.4%.
C
6.6%.
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