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#has-images #reading-7-discounted-cashflows-applications
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The effective annual yield formula

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Tags
#has-images #reading-7-discounted-cashflows-applications
Question

The effective annual yield formula

Answer
?

Tags
#has-images #reading-7-discounted-cashflows-applications
Question

The effective annual yield formula

Answer

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Subject 4. Different Yield Measures of a U.S. Treasury Bill
#13; Since a pure discount instrument (e.g., a T-bill) makes no interest payment, its HPY is (P 1 - P 0 )/P 0 . Note that HPY is computed on the basis of purchase price, not face value. It is not an annualized yield. <span>The effective annual yield is the annualized HPY on the basis of a 365-day year. It incorporates the effect of compounding interest. Money market yield (also known as CD equivalent yield) is the annualized HPY on the basis of a 360-day year using simple interest.

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