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5 Cards in this Set
- Front
- Back
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How to determine if the IRR is acceptable for a project?
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It is higher than the given discount rate.
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Holding Period Yield:
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The actual return an investor will receive if the money market instrument is held until maturity.
HPY = Profit / Purchase price Example: 100,000 T-Bill bought for 98,000. 2,000 / 98,000 = 2.041% |
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rMM
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an annualized HPY on the basis of 360 days and does NOT incorporate the effects of compounding.
Rmm = HPY / (# of days held / 360) |
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EAY
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an annualized HPY on the basis of 360 days and does NOT incorporate the effects of compounding.
EAY = (1+HPY)^(365/150)-1 |
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Bond-Equivalent yield
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2 times the semiannual discount rate. This convention stems from the fact that yields on U.S. bonds are quoted as twice the semiannual rate, because the coupon interest is paid in two semiannual payments.
[(1+HPY)^2] -1 |
