Pacific Motors Inc. plans to issue $3,000,000 of commercial paper with a 6-month maturity at 98% of par value. What is the EAR?
A) 4.12%
B) 4.08%
C) 4.00%
D) 2.00%
Answer: A
Explanation: A) EAR = (1 + periodic rate)m - 1 = (1.0204)2 - 1 = 4.12%.
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