Page 98 - CFA - Day 1 & 2 Course Notes
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LOS 7.f: Convert among holding period Session Unit 2: Discounted Cash Flow Applications
yields, money market yields, effective
annual yields, and bond equivalent yields.
Example: Converting among EAY, HPY, and rMM
Assume you purchased a $100,000 T-bill that matures in 150 days for a price of $98,000. The
broker who sold you the T-bill quoted the money market yield at 4.898%. Compute the HPY
and the EAY.
Money market to holding period yield—rMM
is an annualized yield based on a 360-day year.
To change the rMM in this example into its
HPY, we need to convert it to a 150-day holding
period by multiplying it by (150 / 360). Thus:
