A Firm Issues Two-Month Commercial Paper with $1,000,000 Face Value

question 74

Multiple Choice

A firm issues two-month commercial paper with $1,000,000 face value and receives $985,000. What is the EAR the firm is paying for these funds?

• A) 1.52%
• B) 7.50%
• C) 9.49%
• D) 15.00%

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Definitions:

Recessionary Gap

A situation where the real GDP is lower than the potential GDP, and the economy is producing below its capacity.

Income Tax Surcharge

An additional charge on the basic income tax liability, often applied to higher income brackets to collect additional revenue from them.

Federal Deficit

The amount by which the government's total budget outlays exceed its total receipts for a fiscal year.

Discretionary Fiscal Policy

Government policy involving deliberate manipulation of government spending and taxes to influence the economy based on current economic conditions.