Yield on Money market Instrument

CFA Level I
#1
  • Bank Discount Yield (Rbd): [(Face value - Po) / face value] x 360 /t where: Po= Face value - [Face value x Rbd x t/360] - Holding period yield (for T-Bill): P1-Po/Po Effective annual yield (EAY): [(1+HPY)^365/t] -1 - Money market yield (Rmm)= HPY x 360/t = 360 x Rbd/ 360 - (t)(Rbd)
#2

nice

#3

strangedays Wrote: ------------------------------------------------------- > - Bank Discount Yield (Rbd): [(Face value - Po) / > face value] x 360 /t > > where: Po= Face value - > > - Holding period yield (for T-Bill): P1-Po/Po > > Effective annual yield (EAY): [(1+HPY)^365/t] -1 > > - Money market yield (Rmm)= HPY x 360/t = 360 x > Rbd/ 360 - (t)(Rbd) HPY looks like the HPR formula EAY looks like the EAR formula this is corp finance, it is easy to mix up formulae from here with some in Vol 1 - QUANT. ugggggghhhhh.

#4

< - Bank Discount Yield (Rbd): [(Face value - Po) / face value] x 360 /t where: Po= Face value - [Face value x Rbd x t/360] > Po = purchase price, right?

#5

Yep

#6

HPY doesnt get multiplied by days to maturity? in numerator? Lets say 200 days to maturity

#7

HPY no

#8

Stupid question, does BEY = EAY?

#9

strangedays Wrote: ------------------------------------------------------- > - Bank Discount Yield (Rbd): [(Face value - Po) / > face value] x 360 /t > > where: Po= Face value - > > - Holding period yield (for T-Bill): P1-Po/Po > > Effective annual yield (EAY): [(1+HPY)^365/t] -1 > > - Money market yield (Rmm)= HPY x 360/t = 360 x > Rbd/ 360 - (t)(Rbd) To strangedays, please refer daj224’s provided equation from http://www.analystforum.com/phorums/read.php?11,713979 that means BDY=BEY??? But why when i doing CFAI online test, the answer explains that BEY = [(1+HPR) ^ (182.5/ number of days to maturity)] -1 x 2??? so which one should we refer to do on what kind of questions? thanks,