What is a Discount Yield?
Discount yields are the amount of yield that is realized on securities that are sold at a discount. While a discount yield may apply to several different types of securities, the concept is most commonly associated with treasury bills. The idea behind the discount yield is to determine how much yield will be realized in the current financial year. In order to determine the annual discount yield, it is necessary to utilize a few basic factors related to the security. The first figure that is required is the face amount of the security. Next, the face amount is multiplied by the number of days in the fiscal year. Once that calculation is complete, the result is divided by the number of days remaining until the security reaches maturity. Investors often make use of this formula to project the discount yield when evaluating the feasibility of purchasing or holding on to the security. Doing so makes it possible to determine if a given security is likely to result in a return that the invest
