Honesty Company is exploring to issue a financial instrument next year. They are researching for a reasonable interest rate to offer. The financial instrument is expected to cover for 180 days. Government Treasury Bills are being offered with the following rates: 30 day – 1.5%; 60 day – 2%; 90 day – 2%; 180 day – 2.50%; and 360 day – 3%. Inflation was reported at 1.2%. Honesty must be able to safeguard at least 3% of the risk for this issuance. What is the appropriate interest rate (round off your answer to two decimal places)?

Honesty Company is exploring to issue a financial instrument next year. They are researching for a reasonable interest rate to offer. The financial instrument is expected to cover for 180 days. Government Treasury Bills are being offered with the following rates: 30 day – 1.5%; 60 day – 2%; 90 day – 2%; 180 day – 2.50%; and 360 day – 3%. Inflation was reported at 1.2%. Honesty must be able to safeguard at least 3% of the risk for this issuance. What is the appropriate interest rate (round off your answer to two decimal places)?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 17P

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