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#reading-7-discounted-cashflows-applications
Question
Bank discount yield is not a meaningful measure of the return on investment because:
  • It is based on the face value , not on the purchase price.
  • It is [...] .
  • It annualizes with simple interest and ignores the effect of interest on interest (compound interest).
Answer
annualized using a 360-day year, not a 365-day year



Tags
#reading-7-discounted-cashflows-applications
Question
Bank discount yield is not a meaningful measure of the return on investment because:
  • It is based on the face value , not on the purchase price.
  • It is [...] .
  • It annualizes with simple interest and ignores the effect of interest on interest (compound interest).
Answer
?

Tags
#reading-7-discounted-cashflows-applications
Question
Bank discount yield is not a meaningful measure of the return on investment because:
  • It is based on the face value , not on the purchase price.
  • It is [...] .
  • It annualizes with simple interest and ignores the effect of interest on interest (compound interest).
Answer
annualized using a 360-day year, not a 365-day year


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Subject 4. Different Yield Measures of a U.S. Treasury Bill
unt basis D = the dollar discount, which is equal to the difference between the face value of the bill, F, and its purchase price, P t = the number of days remaining to maturity 360 = the bank convention of the number of days in a year. <span>Bank discount yield is not a meaningful measure of the return on investment because: It is based on the face value, not on the purchase price. Instead, return on investment should be measured based on cost of investment. It is annualized using a 360-day year, not a 365-day year. It annualizes with simple interest and ignores the effect of interest on interest (compound interest). Holding period yield (HPY) is the return earned by an investor if the money market instrument is held until maturity: P 0 =

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