Commercial Paper is sold at a discount from its face value and redeemed at its face value. Calculate the pre-tax cost on annualised basis of commercial paper, if face value is ₹5,00,000, maturity period is 180 days and n
CS Professional · Corporate Funding & Listings in Stock Exchanges · PYQS · June 2019
Commercial Paper is sold at a discount from its face value and redeemed at its face value. Calculate the pre-tax cost on annualised basis of commercial paper, if face value is ₹5,00,000, maturity period is 180 days and net amount realized is ₹4,80,000. (Assume 360 days in a year.)
Answer & Explanation:
Cost of commercial paper = Face Value - Amount Realised (Net) / Net Amount Realised * 360 / Maturity Period = (₹5,00,000 - ₹4,80,000) * 360 / 180 / ₹4,80,000 = 8.33%
Topics: Money Market Instruments
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