A large, listed company is to issue 90-day commercial paper with a nominal value of $10m. Each paper will have a nominal value of $100,000. The annual required rate of return is 4% assuming a 365-day year. What will be the issue price of each paper?
To determine the issue price of a commercial paper with a nominal value of $100,000, a 90-day maturity, and an annual required rate of return of 4%, we can use the following formula:
Plugging the numbers from the task, we get: