Commerzbank is seeking to invest $100 million short term. It has the choice between buying Euro-CP yielding 6.34% annually and a U.S. bank deposit yielding 6.36% annually, both maturing in 150 days. The Euro-CP yield is calculated on a 360-day year, whereas the U.S. bank-deposit yield is calculated on a 365-day year.

a. How much Euro-CP in terms of face value can Commerzbank’s $100 million buy?

b. Assuming that all else is equal, which is Commerzbank’s preferred investment? Explain.

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c. What would be the annual yield on the U.S. bank deposit if it were quoted on a 360- day year?

d. What would be the annual Euro-CP yield if it were quoted on a 365-day year?

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