What simple interest rate was used to discount 270-day, $750,000 commercial paper when it was issued for $710,000?
A) 7.21%
B) 7.62%
C) 5.33%
D) 6.63%
E) 6.94%

Question

Quizplus · Accepted Answer

The simple interest rate can be calculated using the formula for discount yield, which is (Face Value - Purchase Price) / Face Value * (360 / Number of Days). Plugging in the given values: ($750,000 - $710,000) / $750,000 * (360 / 270) = $40,000 / $750,000 * 4/3 = 0.0762 or 7.62%.

What Simple Interest Rate Was Used to Discount 270-Day, $750,000