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Magna Corporation has an issue of commercial paper with a face value of $ 1 comma 000 comma 000 and a maturity of six months. Magna received net proceeds of $ 973 comma 710 when it sold the paper. What is the effective annual rate ​(EAR​) of the paper to​ Magna?

Respuesta :

Karabo99

Answer:

The effective annual rate ​(EAR​) of the paper to​ Magna is 5.47%

Explanation:

interest rate = [1000000 - 973710]/[973710]

                     = 2.7%

EAR = (1 + interest rate)^2 - 1

       = (1 + 2.7%)^2 - 1

       = 5.47%

Therefore, The effective annual rate ​(EAR​) of the paper to​ Magna is 5.47%

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