What is the use of Money Market Yield and Bank Discount Yield?
I read your article about Money Market Yield and Bank Discount Yield
http://minute-class.com/finance/yield-yield-and-yield/
I understand the formula but what are the purposes of defining MMY and BDY? Who will use them? Thanks a lot!
February 10th, 2009 in
CFA - LEVEL 1, Question Posted by calcal
calcal, money market yield and bank discount yield are usually used in the Money Market. The reason for their existence is because that they were used before the invention of calculators/computers. So, it is easier for human to calculate. For example, in BDY, the denominator is 100 (face value) instead of purchasing price, there is no compounding and 360 days is used. All these make the hand calculation easier.