A firm buys $1,000,000 of a 30-day commercial paper issue for $995,450. The bond equivalent yield on this commercial paper is:

Name: A firm buys $1,000,000 of a 30-day commercial paper issue for $995,450. The bond equivalent yield on this commercial paper is:
Brand: Quizplus
Rating: 4.8 (52 reviews)

Question

Quizplus · Accepted Answer

The bond equivalent yield (BEY) is calculated using the formula: BEY = [(Face Value - Purchase Price) / Purchase Price] * (365 / Days to Maturity). Plugging in the values: BEY = [($1,000,000 - $995,450) / $995,450] * (365 / 30) = 5.56%.

A Firm Buys $1,000,000 of a 30-Day Commercial Paper Issue