Ask Question
24 July, 17:28

Magna Corporation has an issue of commercial paper with a face value of $ 1 comma 000 comma 000 and a maturity of six months. Magna received net proceeds of $ 973 comma 710 when it sold the paper. What is the effective annual rate (EAR ) of the paper to Magna?

+4
Answers (1)
  1. 24 July, 17:45
    0
    The effective annual rate (EAR ) of the paper to Magna is 5.47%

    Explanation:

    interest rate = [1000000 - 973710]/[973710]

    = 2.7%

    EAR = (1 + interest rate) ^2 - 1

    = (1 + 2.7%) ^2 - 1

    = 5.47%

    Therefore, The effective annual rate (EAR ) of the paper to Magna is 5.47%
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Magna Corporation has an issue of commercial paper with a face value of $ 1 comma 000 comma 000 and a maturity of six months. Magna ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers