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Note Purchase Yield On Cost Calculator

Discount-to-face note purchases generate yield above face coupon rate.

Face value

Purchase price

Coupon rate %

Years to maturity

Yield on cost

0.14%

Annual coupon

$700,000

Annual discount accretion

$400,000

How the math works

Coupon = face × rate. Accretion = (face − purchase) ÷ years. YoC = (coupon + accretion) ÷ purchase.

$10M × 7% = $700k coupon + $2M/5 = $400k accretion = $1.1M ÷ $8M = 13.75% yield on cost.

Editorial noteMaintained by EveryCalc - Reviewed June 2026

EveryCalc calculators are designed for fast, practical estimates with transparent inputs and no required account. We use plain formulas, visible assumptions, and related tools so visitors can check the result from more than one angle.

Results are informational only. For financial, tax, legal, medical, construction, or other high-impact decisions, verify the output against primary sources or a qualified professional.

Learn more about our review process on the EveryCalc methodology page.

How this calculator works

What this page estimates

This Note Purchase Yield On Cost Calculator is built to give a quick, browser-based estimate for note purchase yield on cost. Discount-to-face note purchases generate yield above face coupon rate. The inputs stay on the page during normal use, and the result should be treated as an estimate for planning, comparison, or education rather than professional advice.

Calculation approach

The calculator applies the standard relationship implied by the inputs, then formats the answer so it can be checked and reused. For finance tools, the most important step is using consistent units, rates, time periods, and assumptions before comparing the result with another calculator or outside quote.

Example workflow

For example, start with a realistic value you already know, change one input at a time, and watch how the answer moves. That makes it easier to tell whether the result is being driven by the main amount, the rate, the time period, or a unit conversion.

Practical checks

Use current, real-world numbers when the result affects money, health, tax, or legal decisions.
Run a low, base, and high case when the inputs are estimates.
Check the related calculators below when the next decision depends on a different assumption.

How to interpret the note purchase yield on cost result

Best use

Use the result as a planning number for comparing payments, rates, returns, tax reserves, or cash-flow choices before you request a quote or make a commitment.

Cross-check

Compare the answer with the contract, lender estimate, tax form, brokerage statement, payroll record, or invoice that will control the real-world outcome.

Watch for

Do not rely on a single optimistic rate, return, or fee assumption. Money pages work best when you run low, base, and high cases and keep professional advice separate from the estimate.

This page belongs to the Finance calculator library, so the answer should be read in the context of the decision you are modeling rather than as a universal rule.

Before relying on this note purchase yield on cost estimate

Most calculator mistakes come from the inputs, not the arithmetic. Use this short audit before you reuse the answer in a spreadsheet, quote, application, or important conversation.

Confirm source numbers

Match balances, rates, fees, taxes, income, and payment dates against the lender quote, payroll record, tax form, statement, invoice, or contract.

Separate cash flow from total cost

A lower monthly payment can still cost more over time if fees, interest, taxes, or a longer term are hidden in the structure.

Run conservative cases

Test at least one higher-cost or lower-return case before using the output for a purchase, refinance, investment, loan, or tax decision.

Rerun this page when the rate, price, term, fee, tax rule, income, expense, or expected holding period changes.

How to Use

Enter face value.
Enter purchase price.
Enter coupon rate %.
Enter years to maturity.
Read yield on cost.

Frequently Asked Questions

Why buy notes at a discount?

Secondary note market sells distressed or illiquid loans below face value. Reasons: (1) lender wants to free balance sheet capacity, (2) note is non-performing and lender values certainty over maximum recovery, (3) lender needs quick exit for regulatory or strategic reason. Buyers earn yield above coupon: a $10M note with 7% coupon bought at $8M (80% of face) earns 8.75% yield from coupon alone, plus $2M principal uplift if held to maturity.

What's yield on cost?

YoC = (coupon $ + prorated gain on discount) ÷ purchase price. For a 5-year $10M note with 7% coupon bought at $8M: annual coupon $700k, annual discount accretion $400k ($2M / 5 years), total annual yield $1.1M on $8M cost = 13.75% YoC. This is simplified; in reality timing and default risk matter. IRR calculation is more rigorous — yields typically 12-25% on performing-discount and 20-40% on distressed with workout.

Risks?

Default: borrower may stop paying at any time. Modification: borrower may negotiate rate reduction or term extension. Pre-payment: some notes pay off early at face, reducing yield. Origination fraud: note terms may not match documentation. Enforcement cost: pursuing non-paying borrower has legal cost. Specialist debt funds evaluate before buying; amateur investors often overlook. Experience and legal due diligence essential.

Who buys discount notes?

Distressed debt funds (Oaktree, Cerberus, Apollo). Private credit and debt funds (Blackstone, Bain, BlackRock). Banks (buying competitor notes during bank failures). Opportunistic real estate funds. Family offices with real estate expertise. Individual investors rarely — requires scale and expertise. Institutional investors allocate 2-10% of portfolio to discount debt during market dislocations, targeting 15-25% returns.