A T-bill has a face value of $100,000, 270 days till maturity and is selling for $96,400. Can someone please confirm that the: annualized bank discount yield is: 4.80% money market yield is: 4.98% I always mess up what goes in the denominator, face or current price. Thanks.
yup its rt
Yep your answers are correct just checked them
thank you both
Yes. I get the same answer as you on both. While we’re at it: HPY = 3.73% EAY = 5.08% confirm please, thanks.
Yes its rt
correct
How did you get the EAY?
(1+HPY)^(365/270)-1
oh 365… I did 360 Thanks Chris
Next year I’ll do 366…
Summary: F = Face, P=Price 1. HPY = (F-P)/P --> Holding Period Yield encountered many times later. 2. MMY or RMM (Money Market) = HPY * 360/T 3. (1+HPY)^365/T = EAY 4. BDY (Bank Discount Yield) (also encountered later) = (F-P)/F
So is it 360 or 365?
EAY is always 365.
sorry 365… corrected the other post…
cpk EAY = (1+HPY)^365/T and BDY = (F-P)/F * 360/T = Discount/Face * 360/T the factor for yearly yields are always 360/T (no compounding based on 360 days) EXCEPT for EAY which is compounded daily. and MMY = 360*BDY/(360 - t*BDY)
The MMY = 360*BDY/(360-t*BDY) is just a derivation from the MMY and BDY basic equations.