Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

( a ) A company is planning to issue a commercial paper having a nominal value of Rs . 2 0 , 0 0 ,

(a)A company is planning to issue a commercial paper having a nominal value of Rs.20,00,000 which will be redeemable after completion of 90 days. It is issued at a discount of 4% p.a. Find out the discount, issue price and money market yield on this commercial paper.
However, the
funds required only for 70 days. The excess funds can be invested in securities earning 16%. The brokerage fee associated with the transaction is 1.5%.
Calculate the net cost to the company in issuing the commercial paper.b)A Business entity issues a commercial paper worth Rs.10,00,000 which will be redeemable after completion of 90 days. If the discount is 2%, Find out the rate of interest on this commercial paper. Also, determine the net cost incurred by the organization, if brokerage charged was 1%. The company utilized the sum for 60 days only, and the amount was invested in the share markets for 30 days which yield returns @ 18% p.a.(assume no of days in a year 360).

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions

Question

Cite ways to reduce excess spending.

Answered: 1 week ago