Note Purchase Yield Calculator

Performing notes yield. This calculator computes effective return.

Face value

Purchase price

Coupon rate

Remaining years

Prepayment speed %

Effective yield

10.13%

Discount %

15.00%

Coupon yield on purchase %

8.82%

How the math works

Coupon yield on PP = face × coupon ÷ purchase. Accretion yield = annualized discount pull. Total = sum.

Performing notes bought at 85-90% of face with 7-8% coupons routinely return 10-12% effective yield including accretion. Default rate on performing notes runs 2-5% annually — adjust gross yield down by that default expectation for true expected return.

How to Use

Enter note face value.
Enter purchase price.
Enter coupon rate %.
Enter remaining term.
Enter prepayment speed %.
Read effective yield.

Frequently Asked Questions

Where supply?

Private sellers (non-bank lenders). Distressed banks (sell sub-performing). Asset managers (portfolio cleanups). Brokers (network intros). Estate sales (inherited notes). Each has different risk profile and discount structure.

Yield components?

Coupon (cash flow). Discount accretion (buy at $0.85, receive face at maturity/prepay = 17% pull toward par). Prepayment acceleration (faster = higher yield if bought at discount). Default loss (offset).

Prepayment speed?

Owner-occupied residential: 15-25% CPR typical. Commercial: 5-15% CPR. Fixed-rate held to maturity: low CPR. Floating/balloon: high CPR. Prepay speed drives discount accretion pace — faster prepay = higher realized yield on discount-bought notes.

How often should I rerun this?

Rerun this calculator whenever inputs change materially — new rent roll data, rate moves, loan balance updates, or quarterly operating data. For active deals, monthly refresh is typical. For stabilized assets under monitoring, quarterly is fine. Treat the output as a decision tool, not a one-time answer — market conditions evolve and so should your analysis.