Explore BrainMass

Explore BrainMass

    Purchase Price, Expected Coupon Equivalent - Commercial Pape

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    A commercial paper note with $1 million par value and maturing in 60 days
    has an expected discount return (DR) at maturity of 6 percent. What was its
    purchase price? What is this note's expected coupon-equivalent (investment
    return) yield (IR)?

    DR = (Par value - Purchase price) / Par value X 360 / Days to maturity
    IR = (Par value - Purchase price) / Purchase price X (365 / Days to maturity

    © BrainMass Inc. brainmass.com June 4, 2020, 12:53 am ad1c9bdddf

    Solution Summary

    This solution illustrates, in detail, how to compute the purchase price and expected coupon-equivalent investment yield on commercial paper.