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( Cost of commercial paper ) Tri-State Enterprises plans to issue commercial paper for the first time in the firm's 35-year history. The firm plans
(Cost of commercial paper) Tri-State Enterprises plans to issue commercial paper for the first time in the firm's 35-year history. The firm plans to issue $500,000 in 180-day maturity notes. The paper will carry a 9.75 percent rate with discounted interest and will cost Tri-State $13,000 (paid in advance) to issue. Note: Assume a 30-day month and 360-day year.
a. What is the effective cost of credit to Tri-State?
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