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