Lystek intends to execute a marketing program half a year from now that requires a  $500,000
  investment. In preparation, the company plans to invest some of its available funds into a  150
 -day  $400,000
  face value commercial paper yielding  5%
 . How much money does Lystek need to purchase the commercial paper? Round your answer to two decimal places. how much does lystek need to purchase the commercial paper

To determine how much Lystek needs to purchase the commercial paper, we use the formula for calculating the purchase price of a commercial paper. The commercial paper is sold at a discount to its face value and the discount depends on the yield.

The formula is:

\[
\text{Purchase Price} = \frac{\text{Face Value}}{1 + \left( \frac{\text{Yield} \times \text{Days}}{360} \right)}
\]

Where:
- Face Value = $400,000
- Yield = 5% = 0.05 (as a decimal)
- Days = 150 (commercial paper typically uses a 360-day year)

Now, let's calculate the purchase price.Lystek needs to invest approximately $391,836.73 to purchase the commercial paper with a face value of $400,000 and a 5% yield over 150 days.

Would you like to go into further details or have any questions?

Here are 5 related questions:
1. What would happen if the yield rate increased to 6%?
2. How does the time until maturity affect the purchase price of commercial paper?
3. What is the difference between the face value and the purchase price called?
4. How would the purchase price change if Lystek purchased a paper with a 200-day term?
5. How does the 360-day convention impact yield calculations?

**Tip:** Always check whether interest rates are expressed annually or for the term when calculating investment yields.

Lystek intends to execute a marketing program half a year from now that requires a $500,000 investment. In preparation, the company plans to invest some of its available funds into a 150-day $400,000 face value commercial paper yielding 5%. How much money does Lystek need to purchase the commercial paper?

Learn how to calculate the purchase price for a 150-day commercial paper with a face value of $400,000 and a 5% yield. Using yield and discount formulas, find out how much Lystek needs to invest. Suitable for finance students and professionals.

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