# Money Market Yield

Money market yield is the rate of return on highly liquid investments with a maturity of less than one year. It is calculated by multiplying the holding period return with a factor of 360/t where t is the number of days between the issue date and maturity date of the investment.

Money market yield is a better indicator of rate of return than the bank discount yield, but it still lacks the compounding effect included in calculation of effective annual yield.

## Formula

Money market yield can be calculated using the following formula:

 Money Market Yield = HPR × 360 t

Where HPR is the holding period return and t is the number of days between the issue date and maturity date.

Holding period return is the percentage total return.

 Holding Period Return = F − P P

Money market yield equation can be modified as follows:

 Money Market Yield = F − P × 360 P t

Where F is the face value i.e. maturity value of the investment and P is the initial issue price.

### Converting Bank Discount Yield to Money Market Yield

If we know the bank discount yield, we can work out the money market yield using the following formula::

 MMY = 360 × BDY 360 - t × BDY

Where BDY is the bank discount yield.

## Example

In the example on bank discount yield we find out that BDY for the following T-bill is 1.32000%:

CUSIP Security Term Auction Date Issue Date Maturity Date Price per \$100
912796NW5 13-Week 12/11/2017 12/14/2017 3/15/2018 99.666333

There are two ways to calculate money market yield: (a) directly using the price and face value and (a) by adjusting the bank discount yield.

 Money Market Yield = \$100 − \$99.666333 × 360 = 1.3244% \$99.666333 91
 MMY = 360 × 1.32% = 1.3244% 360 - 91 × 1.32%