Fixed income money market yields

rymingangel01
Posts: 1
Joined: Tue Aug 12, 2014 9:33 am

Fixed income money market yields

Postby rymingangel01 » Mon Nov 03, 2014 5:51 am

how to calculate yield as per discount basis and add on basis.and what is the formula for PV calculation in both the methods?

edupristine
Finance Junkie
Posts: 722
Joined: Wed Apr 09, 2014 6:28 am

Fixed income money market yields

Postby edupristine » Mon Nov 03, 2014 9:07 am

Discount Yield = [(par value - purchase price)/par value] * [360/days to maturity]

Add on Yield = ($ Discount/price) (360/DTM) where

DTM is the Days to Maturity
$ Discount = DY (Face Value) (DTM)/360, where DY is the Discount Yield
Price = Face Value - $ Discount

Please note that Add On Yield is always greater than than Discount Yield.


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