Commercial paper is usually sold at a discount. Fan Corporation has just sold an issue of 126-day commercial paper with a face value of $0.8 Million The firm has received initial proceeds of $790,546

(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 126 days throughout the year?

b: If a brokerage fee of $7797 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 126 days throughout the year?