Hi everyone, I was wondering if any of you might be able to help with this DCF Applications issue I can’t solve. I am trying to figure out how exactly I can convert the Bank Discount Yield to Money Market Yield. I know something should be substituted in the formula, but I can’t figure out what and how. If anyone can help with what seems to be an actual easy problem. The same thing for converting the Bank Discount Yield to a Holding Period Yield. Thanks in advance for all your help. Regards, Teodora
Bank Discount Yield (BDY) is converted to MMY as follows; MMY = (360*BDY)/[360 - (t* BDY)] And then when you get the MMY, you can simply get HPY as follows; HPY = MMY*(t/360). Hope this helps.
Hi FinPaul, thanks for the answer, however, I was wondering if someone knew how to deduct the formulas (I do have the formulas, the issue is I don’t feel I can memorize the 2). If someone knows how to deduct the 2? Thanks in advance, Teodora