# Discount Rate of Return & Investment Rate of Return

1. What is the difference in basis points between the discount rate of return (DR) and the investment rate of return (IR) on a 10 million commercial paper note purchased at a price of 9.85 million and scheduled to mature in 25 days?

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

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#### Solution Preview

1.

Par value = 10 million

Purchase price = 9.85 million

Days to maturity =25

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

IR = ...

#### Solution Summary

The solution determines the discount rate of return and investment rate of return.

$2.19