Picketfence Realty Issues Commercial Paper with a Face Value of $200,000

Picketfence Realty issues commercial paper with a face value of $200,000 and a maturity of six months. Picketfence receives net proceeds of $198,000 when it sells the paper. If the prime rate is 7.7% APR compounded quarterly, how much savings in interest did Picketfence realize by accessing the commercial paper market?

A) $3,645
B) $6,800
C) $5,696
D) $8,000

Correct Answer:

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