The effective annual yield (EAY) for a T-bill maturing in 150 days is 5.04%. What are the holding period yield (HPY) and money market yield (MMY) respectively? A. 2.04%; 4.90%. B. 5.25%; 2.04%. C. 2.80%; 5.41%.
The EAY takes the holding period yield and annualizes it based on a 365-day year accounting for compounding. The HPY = (1 + 0.0504)150/365 = 1.2041 − 1 = 2.04%. Using the HPY to compute the money market yield = HPY × (360/t) = 0.0204 × (360/150) = 0.04896 = 4.90%.
