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