Question

In: Finance

Suppose an investor purchases a 75-day maturing commercial paper with an even value of $1,500,000 for...

Suppose an investor purchases a 75-day maturing commercial paper with an even value of $1,500,000 for the price of $1,498,126. The discount yield and bond equivalent yield are : Select one:

a. 0.05997, 0.06080

b. 0.6080%, 0.5997%

c. 0.5997%, 0.6080%

d. 0.06080, 0.05997

Solutions

Expert Solution

Discount yield = [($1,500,000 − $1,498,126)/$1,500,000] * (360/75) = 0.005997 or 0.5997%

Bond equivalent yield = [($1,500,000 − $1,498,126)/$1,498,126] * (360/75) = 0.006080 or 0.6080%

jeff jeffy answered 2 years ago
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