A company issued Commercial Paper (CP) having a face value of ₹ 5 lakhs for 90 days' maturity at the interest rate of 10% p.a. of issue price. Calculate its issue price assuming 365 days in a year.
CS Professional · Corporate Funding & Listings in Stock Exchanges · PYQS · December 2022
A company issued Commercial Paper (CP) having a face value of ₹ 5 lakhs for 90 days' maturity at the interest rate of 10% p.a. of issue price. Calculate its issue price assuming 365 days in a year.
Answer & Explanation:
Calculation of Issue Price of Commercial Paper Face Value (FV) of Commercial Paper: ₹ 5,00,000 Rate of Interest (ROI): 10% p.a. Period of maturity: 90 Days Issue Price = Face Value /(1+rate * time) = 5,00,000 / (1 + 10% * 90/365) = 5,00,000 / (1 + 0.024657534) = 5,00,000 / 1.024657534 = ₹ 4,87,967.91 or ₹ 4,87,968 (There may be little difference in the final answer due to consideration of digits after decimal)
Topics: Commercial Paper
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