Problemthe treasurer of a large corporation wants to invest, Ask an Expert

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Problem:

The treasurer of a large corporation wants to invest $36 million in excess short-term cash in a particular money market investment. The prospectus quotes the instrument at a true yield of 4.48 percent; that is, the EAR for this investment is 4.48 percent. However, the treasurer wants to know the money market yield on this instrument to make it comparable to the T-bills and CDs she has already bought.

Required:

Question: If the term of the instrument is 123 days, what are the bond equivalent and discount yields on this investment?

Note: Provide support for your rationale.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91163062

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