medium · Debt Capital Markets pricing-yields-curve
Why is the Discount Yield on a US Treasury Bill always lower than its Bond-Equivalent Yield?
- Discount yields apply only to corporate commercial paper
- The discount yield reflects the effect of semi-annual coupon compounding
- The discount yield uses a 360-day year and divides by the face value
- The bond-equivalent yield embeds the investor's effective marginal tax shield
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