Commercial Paper with a face value of $1,000,000 issued at a discount rate of 7.5% simple interest has a term of 360 days. At what price was it issued?

A) $944,736
B) $1,000,000
C) $925,000
D) $1,073,973
E) $931,122

Question

Stephanie Garraez · Accepted Answer

Final Answer : E, Explanation :   The price at which the commercial paper was issued can be calculated using the formula for simple interest:   Price = Face Value − ( Face Value × Discount Rate × Time )  	ext{Price} = 	ext{Face Value} - (	ext{Face Value} 	imes 	ext{Discount Rate} 	imes 	ext{Time})  Price = Face Value − ( Face Value × Discount Rate × Time )  . Given a face value of $1,000,000, a discount rate of 7.5%, and a term of 360 days, the calculation is   Price = $ 1 , 000 , 000 − ( $ 1 , 000 , 000 × 0.075 × 360 360 ) = $ 1 , 000 , 000 − $ 75 , 000 = $ 925 , 000  	ext{Price} = \$1,000,000 - (\$1,000,000 	imes 0.075 	imes \frac{360}{360}) = \$1,000,000 - \$75,000 = \$925,000  Price = $1 , 000 , 000 − ( $1 , 000 , 000 × 0.075 × 360 360 ​ ) = $1 , 000 , 000 − $75 , 000 = $925 , 000  . Therefore, the correct answer is C, not E, based on the calculation provided.

Commercial Paper with a face value of $1,000,000 issued at a discount rate of 7.5% simple interest has a term of 360 days. At what price was it issued?

A) $944,736
B) $1,000,000
C) $925,000
D) $1,073,973
E) $931,122

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Learning Objectives

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Commercial Paper with a face value of $1,000,000 issued at a discount rate of 7.5% simple interest has a term of 360 days. At what price was it issued?A) $944,736B) $1,000,000C) $925,000D) $1,073,973E) $931,122

Definitions

Learning Objectives

Learning Objectives

Related questions

Commercial Paper with a face value of $1,000,000 issued at a discount rate of 7.5% simple interest has a term of 360 days. At what price was it issued?

A) $944,736
B) $1,000,000
C) $925,000
D) $1,073,973
E) $931,122