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A company purchased 2 million piece of commercial paper to bemature on august1.The paper is...

A company purchased 2 million piece of commercial paper to be mature on august1.The paper is purchased by an investor on june 3. Find the purchase price if based on discount rate of 11% by using p=S (1-dt) and showing full calculations.

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Expert Solution

You purchase a commercial paper of $2 million that will mature on August 1.

You purchased it on June 3, so the no of days of commercial paper from 3 june to 1 Aug = 59 days

Calculating the Purchase price using the formula:-

P = S(1-d*t)

where, P = Purchase price of commercial paper

S = face value of commercial paper = $2,000,000

d = discount rate = 11%

t = no of days = 59

P = $2,000,000*[1-0.11*(59days/360days)]

P = $1,963,944.44

So, the purchase price of commercial paper is $1,963,944.44

jeff jeffy answered 2 years ago
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