RSM4310 MFin 3 2023

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BOOTH: MFin 4310-3 2023 Interest Rate Basics
BOOTH: MFin 4310-3 2023 Discount Note
BOOTH: MFin 4310-3 2023 Discount Notes • You pay $995 (P) for a 30-day promissory note, which is worth $1,000 (F) at maturity. • Its discount rate is 0.5%, this is the % discount from the face value • What is the yield to maturity (K) or interest rate? • This is 0.005025% for 30 days • We express interest rates on an annual basis so what is the annual interest rate? • Assume that you roll this over on the same terms for a full year, how many 30 day periods are there in a year? • US: generally 360 days or a 30/360 day count basis • Canada: 365 days or an actual/actual (normally 365) day count basis % 005025 . 0 995 995 000 , 1 P P F K
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