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Calculate the annual effective cost for raising short-term funds from each of the following two sources of funds: (i) A 91-day commercial paper with denomination
Calculate the annual effective cost for raising short-term funds from each of the following two sources of funds: (i) A 91-day commercial paper with denomination of $1.0 million and a broker who will sell the commercial paper on behalf of the issuing corporation, will charge 0.3% commission at the annual rate. The commission will be paid upfront by the issuing corporation. The commercial paper will currently sell for $992.000 (5 marks) A discounted loan with interest rate of 2% per six months, and a compensating balance requirement of 4% of the amount of the loan. (3 marks) (ii)
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