Why should we use BEY? From what I understand it is just doubling the semi annual rate, yet it seems like it’s supposed to be the method of choice.

Annual rates are preferred to semi annual rates.

Annual rates are easier to comprehend. Comparable to equity and monkey market yields.

MONKEY MARKET YIELDS!!! Just bugging ya Isura

TheAliMan Wrote: ------------------------------------------------------- > MONKEY MARKET YIELDS!!! > I think that given the recent financial meltdown in the commercial paper market, this is a perfectly appropriate term.

hi, there was a question in schweser comparing money market yield, BEY, and effective annual yield… does anyone know how they compare in terms of their magnitude? i can’t remember the exact question off the top of my head but i just remember i didn’t know the answer to it. this was while doing schweser book 6 test #1 (morning/afternoon) thanks in advance

effective annual yield is the actual compounded yield on some nominal rate so it’s always greater than the nominal rate given. The BEY is always greater than the discount yield it is calculated from. The reason for that is pretty much that discount rates would be something like actual rates if you had to invest what you end up with, not what you start with. For example, suppose that a 90-day T-bill is quoted at a discount rate of 8%. That means the T-bill would cost 98 so you would have a cash outlay of 98 not 100 and your actual earned interest is calculated off the 98.