What 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 interest rate can be calculated using the formula for the discount yield on commercial paper, which is [(Face Value - Purchase Price) / Face Value] * (360 / Days to Maturity). Plugging in the given values: [(750,000 - 710,000) / 750,000] * (360 / 270) = 0.0762 or 7.62%.

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