coupon-equivalent rate

Coupon-equivalent rate

See: Equivalent bond yield

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coupon-equivalent rate

An alternative measure of yield that is used to make securities usually quoted on a discount basis comparable with those quoted on the more usual return on the amount invested. Stating interest at the coupon-equivalent rate is useful for securities, such as Treasury bills and commercial paper, sold at discounts from face value. As an example, a $10,000, 91-day Treasury bill selling for $9,750 is usually quoted at ($10,000 - ^$9,750/_$10,000 ) × ( ^{360 days}/_{91 days} ) = 9.89 % However, the coupon-equivalent rate calculated on the amount of money invested is ($10,000 - ^$9,750/_$9,750 ) × ( ^{360 days}/_{91 days} ) = 10.14 % See also bank-discount basis.