True interest cost


For a security such as commercial paper that is sold on a discount basis, true interest cost is the coupon rate required to provide an identical return assuming a coupon-bearing instrument of like maturity that pays interest in arrears.

Investing Essentials

Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Acid test ratio

Also called the quick ratio, the ratio of current assets minus inventories, accruals, and prepaid items to current liabilities.

Subscribe to the Term of the Day via email Get the Term of the Day in your inbox!

Create your free portfolio