What is the effective annual cost if a firm issues $10 million of 180-day BAs at a

Question:

What is the effective annual cost if a firm issues $10 million of 180-day BAs at a quoted rate of 6.5 percent, and the bank charges it a 0.5 percent stamping fee? Compare the effective annual cost of 180-day commercial paper issued at $10 million face value for a price of $9,758,000, while the firm must maintain a $10 million credit line and pay a standby fee of 0.5 percent.

Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...