From the following particulars, calculate the effective interest cost per annum to ABC Ltd., which is planning a CP (Commercial Paper) issue: Issue price of a CP: ₹ 97,350 Face Value: ₹ 1,00,000 Maturity period: 3 Months
CS Professional · Corporate Funding & Listings in Stock Exchanges · PYQS · December 2020
From the following particulars, calculate the effective interest cost per annum to ABC Ltd., which is planning a CP (Commercial Paper) issue: Issue price of a CP: ₹ 97,350 Face Value: ₹ 1,00,000 Maturity period: 3 Months
Answer & Explanation:
Interest amount (₹) = 1,00,000 - 97,350 = ₹ 2,650 Maturity period = 3 months Effective interest = ( (Face Value - Issue Price) / Issue Price ) × (12 / Maturity in months) × 100 = ( (1,00,000 - 97,350) / 97,350 ) × (12 / 3) × 100 = (2,650 / 97,350) × 4 × 100 = 0.0272213 × 4 × 100 = 10.8885% = 10.89%
Topics: Commercial Paper (CP)
Related Questions in this Topic
- MSC Ltd would like to issue Commercial Paper (CP). Calculate the effective interest yield of the commercial paper (CP) f...
- What is the difference between the BdL market, which is an EU-regulated market, and the Euro MTF market, which is an exc...
- One of the measures of the principles of the corporate governance and protection of minority shareholder is "Equitable t...
- Rajesh, the promoter of the company had acquired 10000 equity shares of the company on 5th April, 2025, for a market pri...
- Explain the reasons for wide range of businesses joining Alternative Investment Market (AIM) of London Stock Exchange.