Commercial paper is usually sold at a discount. Fan Corporation has just sold an issue of

83-day

commercial paper with a face value of

$1.4

million. The firm has received initial proceeds of

$1,352,408.

(Note:

Assume a

365-day

year.)a.What effective annual rate will the firm pay for financing with commercial paper, assuming that it is rolled over every

83

days throughout the year?b. If a brokerage fee of

$13,429

was paid from the initial proceeds to an investment banker for selling the issue, what effective annual rate will the firm pay, assuming that the paper is rolled over every

83

days throughout the year?

Question content area bottom

Part 1

a. The effective annual rate the firm will pay for financing with commercial paper, assuming that it is rolled over every

83

days throughout the year, is

enter your response here%.

(Round to two decimal places.)