Coupon-equivalent Rate Definition

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Definition Of Coupon-equivalent Rate:

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.

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