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Yield of a discount security formula

Description of the Yield of a discount security formula

Formula for the calculation of the yield of discount securities like Treasury bills, commercial paper or certificates of deposit.

Formula

\[ r = \left (\frac{C_{m}}{C_{v}}-1 \right ) \cdot \frac{nbj_{base}}{nbj_{vd \to md}} \ \]

Symbols

\(C_{m}\ \)       
Redeemed capital (generally par)
\(C_{v}\ \)       
Price of the security at value date
\(nbj_{base}\ \)       
Number of days per year (360, 365 or 366 depending on day-count convention)
\(nbj_{vm}\ \)       
Number of days between value date and maturity date