The commercial paper of RKO, Inc. has 75 days until it matures at $500,000. The current market...

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The commercial paper of RKO, Inc. has 75 days until it matures at $500,000. The current market...

The commercial paper of RKO, Inc. has 75 days until it matures at $500,000. The current market price is $492,500. Calculate the discount yield and the bond equivalent yield of this commercial paper.

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Answer 1

Answer #1

Bank discount/Quoted yield = ((Face value-T bill price)/Face value)*360/n

Bank discount/Quoted yield = ((500000-492500)/500000)*360/75

Bank discount/Quoted yield = 7.2

Bond equivalent yield = ((Face value-T bill price)/Face value)*365/n

Bond equivalent yield = ((500000-492500)/500000)*365/75

Bond equivalent yield = 7.3

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Answer 2

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The commercial paper of RKO, Inc. has 75 days until it matures at $500,000. The current market...

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The commercial paper of RKO, Inc. has 75 days until it matures at $500,000. The current market...

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