Let the face value of commercial paper be denoted by F.V., net amount realized from the commercial…

The effective pre-tax cost of commercial paper is $\frac{(\text{F.V.} - \text{NAR})}{\text{NAR}} \times \frac{360}{\text{MP}}$. The difference between face value and net amount realized is the financing cost over the maturity period; dividing by the net amount realized gives the period rate, which is annualized on a 360-day basis over the maturity period MP (in days).