Discount to Yield

Monday, September 1st, 2014

Expresses the discount rate as a true interest cost, on a per annum basis, in most cases, maturities exceeding 180 days will be subject to semi-annual compounding. The Discount to Yield calculation is the yield a present value will achieve as it reaches its future value (face value) at maturity. Both Simple Discount to Yield as well as Semi-Annually Compounded Discount to Yield take into account the time value of money. The first is an uncompounded per annum discount rate divided by the face value of the receivable, whereas the latter is a compounded per annum discount rate divided by the face value of the receivable.