Saskatchewan Wheat Fields Inc.is planning to issue $100 million of commercial paper with 30 days to maturity.There is a 1% probability that the firm will default on the issue and the investor will receive zero.The investor's required rate of return is 5%.If the firm wishes to issue the commercial paper at par,the promised yield must be:
A) 17.17%
B) 5%
C) 8.25%
D) 42.27%

Question

Quizplus · Accepted Answer

[(1+0.05/12)/(1−1%)−1]*12=17.17%