1. What is Money Market Yield?

Money Market Yield is a measure of the annualized return on short-term debt instruments like Treasury bills and commercial paper. It's based on a 360-day year convention commonly used in money markets.

2. How Does the Calculator Work?

The calculator uses the Money Market Yield equation:

Where:

• \( Interest \) — Interest earned (in currency)
• \( Principal \) — Initial investment amount (in currency)
• \( Days \) — Number of days until maturity
• 360 — Standard number of days in money market year

Explanation: The equation annualizes the return by assuming a 360-day year, which is standard practice in money markets.

3. Importance of Money Market Yield

Details: Money Market Yield allows investors to compare returns on different short-term instruments on a standardized annualized basis, despite having different maturities.

4. Using the Calculator

Tips: Enter the interest earned, principal amount, and days to maturity. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why use 360 days instead of 365?
A: The 360-day year is a convention in money markets that simplifies calculations and allows for easier comparison between instruments.

Q2: How does this differ from bond equivalent yield?
A: Bond equivalent yield uses a 365-day year and is typically used for longer-term instruments, while money market yield uses 360 days for short-term instruments.

Q3: What are typical money market instruments?
A: Treasury bills, commercial paper, certificates of deposit, and bankers' acceptances are common money market instruments.

Q4: Is this the same as annual percentage yield (APY)?
A: No, APY uses compound interest and a 365-day year, while money market yield uses simple interest and 360 days.

Q5: When would I use this calculation?
A: Use it when evaluating returns on short-term debt instruments that follow money market conventions.