MMY = [(P – F)/P] x (360/t) = HPY x (360/t)
If the price is not known but the bank discount yield (BDY) is quoted, the money market yield (MMY) of a T-bill can be determined as follows:
MMY = (360 x BDY)/[(360 – t) x BDY)]
Because MMY does not account for the effect of compounding and discounts the total return on a linear basis, money market yield is not directly comparable to bond yields compounded semiannually or annually.
MMY is a true yield based on the investment’s lower price, which makes it greater than an investment’s BDY. MMY is also greater than the HPY since HPY is not annualized and is based on a holding period of less than a year.