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A CD with a Face Value of USD 250 Million

question 53

Multiple Choice

A CD with a face value of USD 250 million was issued at par with a coupon of 5% for 91 days. You buy it in the secondary market when it has 30 days remaining to maturity and is trading at 5.25%. How much do you pay?


Definitions:

Firm's Capital

The financial resources a company uses for its operations, including equity, debt, and retained earnings.

Coupon Rate

The interest rate paid by fixed-income securities, determined as a percentage of the principal value.

Marginal Tax Rate

The tax rate applicable to the last dollar of an individual's or entity's taxable income.

Cost of Debt

The effective rate that a company pays on its current debt, which can include loans, bonds, and any other interest-bearing liabilities.

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