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Securities & Markets

Effective Annual Yield for Money Market Instruments

May 12, 2014
1 min read

For a money market instrument such as a T-bill, Effective Annual Yield is the annualized value of the Holding Period Return and is calculated using the following formula:

Effective Annual Yield
Effective Annual Yield

In our T-bill example, the HPR was 2.53%. If the holding period was 90 days, we can calculate the effective annual yield as follows:

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