Question

4) A $5,500,000.00 piece of Commercial Paper is matures in 140 days. It is selling for $5,391,558.33. At whatrate is it discounted? 5) $5.000.000,00 is invested at the beginning of December. On December 13 another $900,000.00 is invested in the same account. At the end of December, the account is worth $5,150,000.00. The cash-flow adjusted rate of return for December is 6) You buy 800 shares of GHI a $94.92/share on 80% margin. You must deposit to margin Your leverage on this investment is 7) We expect a return on the market of 9.400% and a risk free rate of 1.900%. We expect that in this market Bad Wolf Enterprises will generate a return of 21 800%. Thus we can calculate that Bad Wolf Enterprises has a beta of and the risk premium in this market is B) A Ren

Answer 1

4.

Given,

Face value = $ 5500000

Price = $ 5391558.33

Days to maturity (n) = 140 days

Solution :-

Let the discount rate be 'r' Now, Price = Face Value | | +(8 X /365) 5391558.33= ss00000 [1 + (8 x 140/365)] 5391558.33 = Ssooooo [ + co x 0.3835616438)) 1 + (x 0.3835616438) - SS00000 5391558.33 It co x 0.3835616438) = 1.02011373319 z x 0.3835616438 = 1.02011373319 - 1 O x 0.3835616438 = 0,02011323319 8 = 0.02011323319 0.3835616438 g 0.052438 or 5.7438%. So, discount rate is 5.2438 %.