# on 12-Jul-2017 (Wed)

#### Flashcard 1434939952396

Tags
#6-revisiting-demand-function #cfa #cfa-level-1 #economics #has-images #microeconomics #reading-14-demand-and-supply-analysis-consumer-demand #study-session-4

Question
What’s left of his response must be due to the [...] effect. So, we say that the [...] effect is shown by the move from point a to point b.

If his [...] were then restored, the resulting movement from point b to point c must be the [...]
substitution

substitution

income reduction

income effect.

status measured difficulty not learned 37% [default] 0

Substitution effect and income effect
reduction. If the income reduction is just sufficient to leave him no better or morse than before the price change, we have removed the real income effect of the decrease in price. What’s left of his response must be due to the <span>substitution effect . So, we say that the substitution effect is shown by the move from point a to point b. If his income reduction were then restored, the resulting movement from point b to point

#### Flashcard 1451360390412

Tags
Question

If total [...] exceeds total revenue in the long run, the firm will exit the market as a business entity to avoid the loss associated with fixed cost at zero production.

variable cost

status measured difficulty not learned 37% [default] 0
Open it
firm must cover variable cost before fixed cost. In the short run, if total revenue cannot cover total variable cost, the firm shuts down production to minimize loss, which would equal the amount of fixed cost. If total <span>variable cost exceeds total revenue in the long run, the firm will exit the market as a business entity to avoid the loss associated with fixed cost at zero production. By terminating busi

#### Flashcard 1622018231564

Tags
#tvm
Question
the present value factor formula (2)
$$PV =FV_n {1 \over (1+r)^n}$$

status measured difficulty not learned 37% [default] 0

#### Flashcard 1623805005068

Tags
#discounted-cashflow-applications
Question
In investment management applications, the internal rate of return is called the [...]
money-weighted rate of return

status measured difficulty not learned 37% [default] 0

#### Flashcard 1626081463564

Tags
#balance-sheet-analysis #has-images
Question
How is this ratio called?

Financial Leverage Ratio

status measured difficulty not learned 37% [default] 0
Subject 5. Uses and Analysis of the Balance Sheet
ing debt such as accounts payables, accrued expenses, and deferred taxes. This ratio is especially useful in analyzing a company with substantial financing from short-term borrowing. Total Debt Ratio = <span>Financial Leverage Ratio = Financial statement analysis aims to investigate a company's financial condition and operating performance. Using financial ratios helps to examine relationships among indi

#### Flashcard 1626085395724

Tags
#discounted-cashflow-applications
Question
In investment management applications, the internal rate of return is called the money-weighted rate of return because it accounts for [...] and [...] of all cash flows into and out of the portfolio
the timing and amount

status measured difficulty not learned 37% [default] 0

#### Flashcard 1626110823692

Question
What tribe and clan are Jarir from?
Tribe (qabīla): Tamīm
Group (don't know Arabic word, or if it is technical): Yarbūʿ
Clan (ʿashīra): Kulayb

status measured difficulty not learned 37% [default] 0

#### Annotation 1626115017996

 The cover letter is much more important than many authors realize. This letter usually is your first contact with the editor, and the editor will make some important decisions about your paper based on the contents and professionalism of your cover letter. Note: The cover letter is the only section of the manuscript that is single- spaced.

#### pdf

cannot see any pdfs

#### Annotation 1626116590860

 The purpose of the cover letter is to explain ? politely ? what you are submitting and why. State the title and length of your manuscript and indicate the number of tables and figures. Explain why you decided to submit your manuscript to that particular journal. Why would your paper be of interest to the readers of that journal? What are the strengths of your paper? Explain which section of the target journal would be most appropriate for your manuscript (e.g., Original Articles, Brief Communications, or Reviews). In the salutation of the cover letter, make sure that you use the current editor?s name ? and spell it correctly. Avoid writing ?Dear Editor.? Avoid using the name of the editor of the journal that you submitted to on your first try.

#### pdf

cannot see any pdfs

#### Annotation 1626118163724

 Help the editors appreciate the significance of your work. Explain what is already known about this area and the advances presented in your paper. Summarize what is new and why the editor should care. The important question that is answered in this paper is X and that is important because of Y. Describe any related papers that you have submitted or will submit soon. Help the editor identify appropriate reviewers, especially for papers that use unusual methodologies or have a limited number of qualified experts.

#### pdf

cannot see any pdfs

#### Annotation 1626623839500

 Medieval history, then, as recorded at the time, appears for the most part confined to events affecting no more than one of the three great power blocs.

#### pdf

cannot see any pdfs

#### Annotation 1626625412364

 ut while medieval history portrays the protagonists' conflict over funda mentals, those fundamentals stand revealed as largely identical as soon as the sameness of problems, principles, methods, and aims is envisaged rather than the disparity of the individual solution, procedure, and style of argument or action.

#### pdf

cannot see any pdfs

#### Annotation 1626629606668

 Subject 1. NPV and IRR #reading-7-discounted-cashflows-applications A company should choose those capital investment processes that maximize shareholder wealth. The net present value (NPV) of an investment is the present value of its cash inflows minus the present value of its cash outflows. The internal rate of return (IRR) is the discount rate that makes net present value equal to 0. According to the NPV rule, a company should accept projects where the NPV is positive and reject those in which the NPV is negative. A positive NPV suggests that cash inflows outweigh cash outflows on a present value basis. That is, the positive cash flows are sufficient to repay the initial investment along with the capital costs (opportunity cost) associated with the project. If the company must choose between two, mutually-exclusive projects, the one with the higher NPV should be chosen. According to the IRR Rule, a company should accept projects where the IRR is greater than the discount rate used (WACC) and reject those in which the IRR is less than the discount rate. An IRR greater than the WACC suggests that the project will more than repay the capital costs (opportunity costs) incurred. There are three problems associated with IRR as a decision rule. Reinvestment The IRR is intended to provide a single number that represents the rate of return generated by a capital investment. As such, it is an easy number to interpret and understand. However, calculation of the IRR assumes that all project cash flows can be reinvested to earn a rate of return exactly equal to the IRR itself. In other words, a project with an IRR of 6% assumes that all cash flows can be reinvested to earn exactly 6%. If the cash flows are invested at a rate lower than 6%, the realized return will be less than the IRR. If the cash flows are invested at a rate higher than 6%, the realized return will be greater than the IRR. Scale In most cases, NPV and IRR rules provide the same recommendation as to whether to accept or reject a given capital investment project. However, when choosing between two mutually-exclusive projects (ranking), NPV and IRR rules may provide conflicting recommendations. In such cases, the NPV rule's recommendation should take precedence. One of the situations in which IRR is likely to contradict NPV is when there are two mutually-exclusive projects of greatly differing scale: one that requires a relatively small investment and returns relatively small cash flows, and another that requires a much larger investment and returns much larger cash flows. Timing The other situation in which IRR is likely to contradict NPV is when there are two mutually-exclusive projects whose cash flows are timed very differently: one that receives its largest cash flows early in the project and another that receives its largest cash flows late in the project.

#### Flashcard 1626630917388

Tags
Question
A company should choose those capital investment processes that maximize [...] .

shareholder wealth

status measured difficulty not learned 37% [default] 0

Subject 1. NPV and IRR
A company should choose those capital investment processes that maximize shareholder wealth. The net present value (NPV) of an investment is the present value of its cash inflows minus the present value of its cash outflows. The internal rate of return (IRR) is the discou

#### Annotation 1626633276684

 #reading-7-discounted-cashflows-applications A positive NPV suggests that cash inflows outweigh cash outflows on a present value basis.

Subject 1. NPV and IRR
The internal rate of return (IRR) is the discount rate that makes net present value equal to 0. According to the NPV rule, a company should accept projects where the NPV is positive and reject those in which the NPV is negative. <span>A positive NPV suggests that cash inflows outweigh cash outflows on a present value basis. That is, the positive cash flows are sufficient to repay the initial investment along with the capital costs (opportunity cost) associated with the project. If the company must choose b

#### Flashcard 1626634849548

Tags
Question
There are three problems associated with IRR as a decision rule.
Reinvestment, Scale and Timing

status measured difficulty not learned 37% [default] 0

Subject 1. NPV and IRR
ater than the discount rate used (WACC) and reject those in which the IRR is less than the discount rate. An IRR greater than the WACC suggests that the project will more than repay the capital costs (opportunity costs) incurred. <span>There are three problems associated with IRR as a decision rule. Reinvestment The IRR is intended to provide a single number that represents the rate of return generated by a capital investment. As such, it is an easy number

#### Flashcard 1626637208844

Tags
Question
The IRR assumes that all project cash flows can be reinvested to earn [...]
a rate of return exactly equal to the IRR itself.

status measured difficulty not learned 37% [default] 0

Subject 1. NPV and IRR
le. Reinvestment The IRR is intended to provide a single number that represents the rate of return generated by a capital investment. As such, it is an easy number to interpret and understand. However, calculation of <span>the IRR assumes that all project cash flows can be reinvested to earn a rate of return exactly equal to the IRR itself. In other words, a project with an IRR of 6% assumes that all cash flows can be reinvested to earn exactly 6%. If the cash flows are invested at a rate lower than 6%, the realized return

#### Flashcard 1626639568140

Tags
Question
A project with an IRR of 6% assumes that all cash flows can be reinvested to earn [...]
exactly 6%.

status measured difficulty not learned 37% [default] 0

Subject 1. NPV and IRR
y a capital investment. As such, it is an easy number to interpret and understand. However, calculation of the IRR assumes that all project cash flows can be reinvested to earn a rate of return exactly equal to the IRR itself. In other words, <span>a project with an IRR of 6% assumes that all cash flows can be reinvested to earn exactly 6%. If the cash flows are invested at a rate lower than 6%, the realized return will be less than the IRR. If the cash flows are invested at a rate higher than 6%, the realized return will

#### Annotation 1626641927436

 #reading-7-discounted-cashflows-applications A project with an IRR of 6% assumes that all cash flows can be reinvested to earn exactly 6%. If the cash flows are invested at a rate lower than 6%, the realized return will be less than the IRR. If the cash flows are invested at a rate higher than 6%, the realized return will be greater than the IRR.

Subject 1. NPV and IRR
y a capital investment. As such, it is an easy number to interpret and understand. However, calculation of the IRR assumes that all project cash flows can be reinvested to earn a rate of return exactly equal to the IRR itself. In other words, <span>a project with an IRR of 6% assumes that all cash flows can be reinvested to earn exactly 6%. If the cash flows are invested at a rate lower than 6%, the realized return will be less than the IRR. If the cash flows are invested at a rate higher than 6%, the realized return will be greater than the IRR. Scale In most cases, NPV and IRR rules provide the same recommendation as to whether to accept or reject a given capital investment project. However, when

#### Flashcard 1626644286732

Tags
Question
Why is Timing of cashflows an issue with IRR?

Since IRR supposes the reinvestment of the funds at the same rate the distance between cashflows can make a substantial difference

status measured difficulty not learned 37% [default] 0

Subject 1. NPV and IRR
usive projects of greatly differing scale: one that requires a relatively small investment and returns relatively small cash flows, and another that requires a much larger investment and returns much larger cash flows. <span>Timing The other situation in which IRR is likely to contradict NPV is when there are two mutually-exclusive projects whose cash flows are timed very differently: one that receives its

#### Flashcard 1626668403980

Tags
Question
The holding period return for an asset can be calculated for any [...]
time period (day, week, month, or year)

status measured difficulty not learned 37% [default] 0

Subject 2. Holding Period Return
period t is the capital gain (or loss) plus distributions divided by the beginning-of-period price (dividend yield). Note that for common stocks the distribution is the dividend; for bonds, the distribution is the coupon payment. <span>The holding period return for any asset can be calculated for any time period (day, week, month, or year) simply by changing the interpretation of the time interval. Return can be expressed in decimals (0.05), fractions (5/100), or as a percent (5%). These are all equivalent. &

#### Flashcard 1626670763276

Tags
Question
How do you change the time unit in HPR?
Changing the interpretation of the time interval.

status measured difficulty not learned 37% [default] 0

Subject 2. Holding Period Return
d). Note that for common stocks the distribution is the dividend; for bonds, the distribution is the coupon payment. The holding period return for any asset can be calculated for any time period (day, week, month, or year) simply <span>by changing the interpretation of the time interval. Return can be expressed in decimals (0.05), fractions (5/100), or as a percent (5%). These are all equivalent. <span><body><html>

#### Flashcard 1631928585484

Tags
Question
The time-weighted rate of return measures the [...] of $1 initial investment over the measurement period. Answer compound growth rate status measured difficulty not learned 37% [default] 0 Subject 3. Dollar-weighted and Time-weighted Rates of Return rs the timing and amountof cash flows. It is affected by the timing of cash flows. If funds are added to a portfolio when the portfolio is performing well (poorly), the dollar-weighted rate of return will be inflated (depressed). <span>The time-weighted rate of return measures the compound growth rate of$1 initial investment over the measurement period. Time-weightedmeans that returns are averaged over time. This approach is not affected by the timing of cash flows; therefore, it is the preferred method of performance measurement. &#13

#### Flashcard 1631942741260

Tags
Question
Time-weighted means that returns are [...]
averaged over time.

status measured difficulty not learned 37% [default] 0

Subject 3. Dollar-weighted and Time-weighted Rates of Return

#### Flashcard 1632002510092

Tags
Question
When calculating the Time Weighted rate of return if the measurement period < 1 year, [...] to get an annualized rate of return for the year.
compound holding period returns

status measured difficulty not learned 37% [default] 0

Subject 3. Dollar-weighted and Time-weighted Rates of Return
sub-period: HPR = (Dividends + Ending Price)/Beginning Price - 1. For the first year, HPR 1 : (150 + 10)/100 - 1 = 0.60. For the second year, HPR 2 : (280 + 20)/300 - 1 = 0. Calculate the time-weighted rate of return: <span>If the measurement period < 1 year, compound holding period returns to get an annualized rate of return for the year. If the measurement period > 1 year, take the geometric mean of the annual returns. <span><body><html>

#### Flashcard 1632046812428

Tags
Question
When Calculating the time-weighted rate of return:
If the measurement period > 1 year, [...]

take the geometric mean of the annual returns.

status measured difficulty not learned 37% [default] 0

Subject 3. Dollar-weighted and Time-weighted Rates of Return
For the second year, HPR 2 : (280 + 20)/300 - 1 = 0. Calculate the time-weighted rate of return: If the measurement period < 1 year, compound holding period returns to get an annualized rate of return for the year. <span>If the measurement period > 1 year, take the geometric mean of the annual returns. <span><body><html>

#### Annotation 1632632442124

Subject 4. Different Yield Measures of a U.S. Treasury Bill

#### Money market instruments are low-risk, highly liquid debt instruments with a maturity of one year or less. There are two types of money market instruments: interest-bearing instruments (e.g., bank certificates of deposit), and pure discount instruments (e.g., U.S. Treasury bills).

Pure discount instruments such as T-bills are quoted differently than U.S. government bonds. They are quoted on a bank discount basis rather than on a price basis:

• rBD = the annualized yield on a bank discount 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.
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:

• P0 = the initial price of the instrument
• P1 = the price received for the instrument at its maturity
• D1 = the cash distribution paid by the instrument at its maturity (that is, interest).
Since a pure discount instrument (e.g., a T-bill) makes no interest payment, its HPY is (P1 - P0)/P0.

Note that HPY is computed on the basis of purchase price, not face value. It is not an annualized yield.

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.

Example

An investor buys a $1,000 face-value T-bill due in 60 days at a price of$990.

• Bank discount yield: (1000 - 990)/1000 x 360/60 = 6%
• Holding period yield: (1000 - 990)/990 = 1.0101%
• Effective annual yield: (1 + 1.0101%)365/60 - 1 = 6.3047%
• Money market yield: (360 x 6%)/(360 - 60 x 6%) = 6.0606%
If we know HPY, then:
• EAY = (1 + HPY)365/t - 1
• rMM = HPY x 360/t
If we know EAY, then:
• HPY = ( 1 + EAY)t/365 - 1
• rMM = [(1 + EAY)t/365 - 1] x (360/t)
If we know rMM, then:
• HPY = rMM x (t/360)
• EAY = (1 + rMM x t/360)365/t - 1

#### Flashcard 1632708201740

Tags
Question
There are two types of money market instruments: [...], and [...]
interest-bearing instruments (e.g., bank certificates of deposit)

pure discount instruments (e.g., U.S. Treasury bills).

status measured difficulty not learned 37% [default] 0

Subject 4. Different Yield Measures of a U.S. Treasury Bill
Money market instruments are low-risk, highly liquid debt instruments with a maturity of one year or less. There are two types of money market instruments: interest-bearing instruments (e.g., bank certificates of deposit), and pure discount instruments (e.g., U.S. Treasury bills). Pure discount instruments such as T-bills are quoted differently than U.S. government bonds. They are quoted on a bank discount basis rather than on a price basis: &#

#### Flashcard 1632768494860

Tags
Question

Bank discount formula

BDY= [...]

status measured difficulty not learned 37% [default] 0

Subject 4. Different Yield Measures of a U.S. Treasury Bill
earing instruments (e.g., bank certificates of deposit), and pure discount instruments (e.g., U.S. Treasury bills). Pure discount instruments such as T-bills are quoted differently than U.S. government bonds. They are quoted on a <span>bank discount basis rather than on a price basis: r BD = the annualized yield on a bank discount basis D = the dollar discount, which is equal to the difference between the face v

#### Flashcard 1632800214284

Tags
Question

• rBD = [...]
• D = [...]
• t = [...]
• 360 = the bank convention of the number of days in a year.
the annualized yield on a bank discount basis

the dollar discount, which is equal to the difference between the face value of the bill, F, and its purchase price, P

the number of days remaining to maturity

status measured difficulty not learned 37% [default] 0

Subject 4. Different Yield Measures of a U.S. Treasury Bill
bills). Pure discount instruments such as T-bills are quoted differently than U.S. government bonds. They are quoted on a bank discount basis rather than on a price basis: <span>r BD = the annualized yield on a bank discount 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. 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 inves

#### Flashcard 1632835865868

Tags
Question
Bank discount yield is not a meaningful measure of the return on investment because:
• It is based on [...] , not on the [...] .
• 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).
the face value

purchase price

Instead, return on investment should be measured based on cost of investment.

status measured difficulty not learned 37% [default] 0

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 =

#### Flashcard 1632864439564

Tags
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).
annualized using a 360-day year, not a 365-day year

status measured difficulty not learned 37% [default] 0

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 =

#### Flashcard 1632883051788

Tags
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 annualized using a 360-day year, not a 365-day year.
• It [...]
annualizes with simple interest

ignores the effect of interest on interest (compound interest).

status measured difficulty not learned 37% [default] 0

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 =

#### Flashcard 1632905858316

Tags
Question
Holding period yield (HPY) formula:

HPY= [...]

status measured difficulty not learned 37% [default] 0

Subject 4. Different Yield Measures of a U.S. Treasury Bill
tead, 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). <span>Holding period yield (HPY) is the return earned by an investor if the money market instrument is held until maturity: P 0 = the initial price of the instrument P 1 = the price received for the instrument at its maturity D 1 = the cash distributio

#### Flashcard 1632930237708

Tags
Question

• P0 = [...]
• P1 = [...]
• D1 = [...]
the initial price of the instrument

the price received for the instrument at its maturity

the cash distribution paid by the instrument at its maturity.

status measured difficulty not learned 37% [default] 0

Subject 4. Different Yield Measures of a U.S. Treasury Bill
gnores 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: <span>P 0 = the initial price of the instrument P 1 = the price received for the instrument at its maturity D 1 = the cash distribution paid by the instrument at its maturity (that is, interest). 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, n

#### Flashcard 1633124486412

Tags
Question
In a T-bill HPY is computed on the basis of [...], not [...]
purchase price

face value.

status measured difficulty not learned 37% [default] 0

Subject 4. Different Yield Measures of a U.S. Treasury Bill
instrument at its maturity D 1 = the cash distribution paid by the instrument at its maturity (that is, interest). Since a pure discount instrument (e.g., a T-bill) makes no interest payment, its HPY is (P 1 - P 0 )/P 0 . <span>Note that HPY is computed on the basis of purchase price, not face value. It is not an annualized yield. The effective annual yield is the annualized HPY on the basis of a 365-day year. It incorporates the effect of compounding interest. &#

#### Flashcard 1633167740172

Tags
Question
Is the HPR of a T-bill annualized?
No

status measured difficulty not learned 37% [default] 0

Subject 4. Different Yield Measures of a U.S. Treasury Bill
ument at its maturity (that is, interest). 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. <span>It is not an annualized yield. The effective annual yield is the annualized HPY on the basis of a 365-day year. It incorporates the effect of compounding interest.

#### Flashcard 1633194216716

Tags
Question
With which formula do you annualize the HPY of a T-Bill on a 365 basis
The effective annual yield

status measured difficulty not learned 37% [default] 0

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

#### Flashcard 1633214401804

Tags
Question

The effective annual yield formula

status measured difficulty not learned 37% [default] 0

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.

#### Flashcard 1633232489740

Tags
Question
Money market yield is also known as [...]
CD equivalent yield

status measured difficulty not learned 37% [default] 0

Subject 4. Different Yield Measures of a U.S. Treasury Bill

#### Annotation 1633764379916

 A zero-coupon bond is a debt security that doesn't pay interest (a coupon) but is traded at a deep discount, rendering profit at maturity when the bond is redeemed for its full face value.