Fixed Income: Eurocommercial paper rates are quoted as an add-on-yield.

What is the add-on-yield and how it is calculated.

I’d imagine that it’s LIBOR or Eurobor.

It’s calculated just as you’d suspect. For example, if the face value is €1,000 for 270-day paper with an interest rate of 6%, then the interest is:

€1,000 × 6% × 270/360 = €45

Ok here is an example : A 180-day T-bill quoted at a discount yield of 2% for the 180-day period is priced at $980 per $1000 face value. What would be the add-on-yield on this

$20/$980 × 360/180 = 4.0816%

Ok for ECP with a 180-day period, and the same details what would be the addon yield.

Sorry for making things confusing but i am not getting the concept here, is it the Bank-discount yield we studied in Quantitative Methods.

​I have the same problem with this. Schweser notes do not really provide an explanation on how to compute this. I found this formula which is the same as S2000 used above (except for the 365 instead of 360 days):


​Add-On Yield= quoted annual rate* n/365​

​So in your example, I would get:

​Add-On Yield= 2%* 180/365=0.9863%