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borteleto borteleto
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5 years ago
AAC, Inc. is planning to issue $5,000,000 in 180-day maturity notes paying a rate of 12 percent per annum. The company expects to incur costs of approximately $20,000 in dealer placement fees and other expenses of issuing the commercial paper. The company plans to back up their commercial paper offering with a line of credit from a bank for $5,000,000. The compensating balance requirement is 10 percent of the line of credit. The company normally maintains $450,000 in its accounts with the bank. What is the effective cost of the commercial paper offering?
Textbook 
Foundations of Finance

Foundations of Finance


Edition: 9th
Authors:
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guzmanguzman
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#2
2 years ago
Effect rate =      =    2 = .1296      How did u calculate rate?
wrote...
#3
Educator
2 years ago
Fixed
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