Page 96 - CFA - Day 1 & 2 Course Notes
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LOS 7.e: Calculate and interpret the bank
discount yield, holding period yield, Session Unit 2: Discounted Cash Flow Applications
effective annual yield, and money market
yield for US Treasury bills and other money
market instruments
The Effective Annual Yield (EAY) is an annualized value, based on a 365-day year, that accounts for
compound interest. It is calculated using the following equation: EAY = (1 + HPY)365 / t – 1
