A company wants to raise funds by issuing a 180-day $1,000,000 bank bill on 1 January 2017 at a yield rate of 6

Finance Nov 13, 2020

A company wants to raise funds by issuing a 180-day $1,000,000 bank bill on 1 January 2017 at a yield rate of 6.45% p.a. (simple interest rate). The company incurs fees and charges amounting to $12,000.

a. Find the real cost (as a rate of simple interest % p.a., rounded to 2 decimal places) of raising the funds, allowing for the fees and charges payable at maturity.

Select one:

a. 8.96%

b. 2.43%

c. 6.45%

d. 6.53%

Expert Solution

Real cost is given as=((1000000+12000)*(1+6.45%*180/365)/1000000-1)*365/180
=8.9607%

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