Why does CFA book notes that Bank Discount Yield is based on the face value of the bill and not on its price, Even though the formula of BDY mentions about the price : Rbd= (360/n)[(par-price)/par]? (Ex: BDY should not be used to determine the PV of the cash flow of a T-bill maturing in 150 days?)
Remember that BDY is the odd one out as it uses face value in its denominator. Other’s use Present value as the denominator.
Hope this helps!
Because the yield is calculated as the return divided by the face value, not the return divided by the price.